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Weekly Economic Update: Fed Signals Hikes in Interest Rates

Presented by Nicholas Wealth Management

June 21st , 2021


Weekly Market Update

In this week’s recap: The Fed signals interest rate hikes.


The Week on Wall Street

New messaging from the Federal Reserve on interest rates and inflation last week led to a broad retreat in stock prices.

The Dow Jones Industrial Average dropped 3.45% while the Standard & Poor’s 500 lost 1.91%. The Nasdaq Composite index slipped 0.28% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 0.64%.1,2,3


Unsettled Markets

The Federal Reserve’s announcement on Wednesday that interest rate hikes may likely occur sooner than expected and that it had underestimated the pace of inflation unsettled investors. The hardest hit groups were cyclical stocks, like energy, materials, and industrials, as well as financials and consumer staples.4

Losses accelerated into the week’s close on comments by St. Louis Fed President James Bullard that the first rate hike could be as soon as 2022.

The bond yield curve flattened, as short-term interest rates rose in anticipation of rising rates and longer-term rates declined, reflecting a view of an eventual economic slowdown.


The Fed's Surprise

Last week’s FOMC meeting announcement took investors by surprise as the Fed indicated that two rate hikes in 2023 were likely. It was as recent as March that the Fed had signaled that rates would remain unchanged until 2024.4

The Fed also raised its inflation expectations to 3.4%, up from its March projection of 2.4%, though it continues to believe that price increases will be transitory in nature.5

The Fed provided no indication of when and by how much it might begin tapering its monthly bond purchase program.6



Tip of the Week

You likely have multiple credit cards. Arrange them so that the one with the lowest interest rate is the easiest to reach for in your handbag or wallet.


Media

https://url.us.m.mimecastprotect.com/s/B2acCW60j7tz249tpADD9L?domain=youtu.be
Over the past year, many workers have been getting paid to not work. Now employers are having a tough time getting workers back on the job. David Nicholas joined Fox Business' David Asman last Monday 6/14, to discuss why the psychology of entry-level workers must change or input costs will continue to increase.

Be sure to subscribe to our YouTube page for all of David’s media commentaries CLICK HERE!



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CITATIONS:

1. The Wall Street Journal, June 18, 2021

2. The Wall Street Journal, June 18, 2021

3. The Wall Street Journal, June 18, 2021

4. CNBC, June 16, 2021

5. The Wall Street Journal, June 16, 2021

6. The Wall Street Journal, June 16, 2021