Weekly Economic Update presented by Meld University

Weekly Riddle:

You see me once in June, twice in November, and not at all in May. What am I?

Tune in next week for the answer.
(Last week's riddle and answer can be found near the end of this post.)

Join us for our next Meld University Event:

Preparing for Long-Term Care Expenses in Retirement presented by Blake May, J.D., CFP®. The webinar will be held on May 11th at 3:00 PM Central Time. There is no cost to attend, but you must register in advance.

 

Weekly Economic Update

LAST WEEK AND THE ECONOMY

Equity markets rose last week despite a disappointing jobs report. Some believe the weak jobs report could prolong the Fed’s ‘easy money’ policies. The U.S. expressed some support for a waiver suspending patent protections on COVID-19 vaccines, allowing for poorer countries to create generic versions for their citizens.

The S&P 500 rose 1.23% last week, the Dow Jones Industrial Average gained 2.67%, the Russell 2K was up 0.21%, and the MSCI EAFE index, which tracks developed overseas stock markets, grew 2.46%. The Nasdaq Composite index lost 1.51%.

Jobs Growth Slowing

The U.S. economy added 266,000 jobs in April, down from 770,000 in March and 536,000 in February. The unemployment rate ticked up from 6.0% to 6.1%. This slowdown in hiring came as investors were expecting the economy to pick up steam and add around a million jobs last month.

On a positive note, the labor force grew significantly and some of the highest job gains were in sectors hard hit by the pandemic, like leisure and hospitality. It’s also important to note that jobs numbers can fluctuate wildly from month-to-month, so investors may look to next month’s data before drawing long-term conclusions based on the weak jobs report.

Manufacturing Growth Slowing

Similarly, the April ISM manufacturing survey fell to 60.7% from 64.7% last month – well below expectations of 65%. Product shortages are becoming more widespread as supply struggles to match rising demand.

Supply chain disruptions typically result in inflation, and to support that point, the ISM’s price index has recently risen to a 13-year high – more than double pre-pandemic levels. ISM index levels above 60% are still very good months for manufacturing, but if these trends continue, it could threaten the speed of this recovery.

U.S. Supports Vaccine Waiver to Increase Vaccine Access in Poorer Countries

The Biden administration backed a waiver on vaccine patents so that other countries can begin production of generic versions of COVID-19 vaccines. Lower-income nations, like India, are facing vaccine shortages and virus outbreaks. The longer that COVID-19 spreads across the world, the more time it has to mutate and threaten the efficacy of the existing vaccines.

Supporters of the waiver claim that it will increase vaccine supply, especially in the poorer countries that got outbid in the early rounds of vaccine distribution. The U.S. had ordered 3.7 doses of vaccines per person by January, the E.U. had 3.5 doses per person, and Canada had 9.6 doses per person. This is in stark contrast to African countries only receiving 0.2 doses per person and Latin America only receiving 0.4 doses per person.

The opposition to this waiver expects the move will not have the desired effect of getting more shots in arms. Pharmaceutical companies believe the move is short-sighted because the new mRNA vaccine production process is much more difficult than other vaccine technologies. The U.K. and E.U. preferred a system of licensing, where the pharmaceutical companies share the production process and provide oversight with a financial incentive.

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Weekly Economic Update presented by Meld University
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The latest jobs report misses expectations. Supply shortages impact inflation. The U.S. supports a COVID-19 vaccine patent waiver.

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Key Economic Data

Unemployment Rate:             6.1% (As of April 2021 – Next Report: 6/4/21)

FOMC Target Rate:                 0 – 0.25% (As of April 28, 2021 – Next Report: 6/16/21)

Data Sources: U.S. Bureau of Labor Statistics, FRED – St. Louis Fed

Weekly Quote:

Wealth after all is a relative thing since he that has little and wants less is richer than he that has much and wants more.
-Charles Caleb Colton

The Week Ahead – Key Economic Data

Wednesday: CPI, EIA Petroleum Status Report.

Thursday: PPI-Final Demand, Jobless Claims.

Friday: Retail Sales, Industrial Production.

Source: Econoday

The Week Ahead – Companies Reporting Earnings

Monday: Duke Energy Corporation (DUK).

Tuesday: Electronic Arts Inc. (EA), Honda Motor Company (HMC), Toyota Motor Company (TM).

Wednesday: Tencent Holding Ltd. (TCEHY), The Wendy’s Company (WEN).

Thursday: Alibaba Group Holdings Limited (BABA), The Walt Disney Company (DIS), Aurora Cannabis Inc. (ACB).

Friday: Capcom Co., Ltd. (CCOEY). Source: Zacks

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Security Filing Strategies
Social Security: What You Need to Know to Maximize Your Retirement Income

Social Security is far more complicated than most people realize. The decisions you make now will have a tremendous impact on the total amount of benefits you will receive over your lifetime.

Weekly Tip:

Be careful when deciding to withdraw from your retirement accounts, it could cost you heavily if you do it at the wrong time. That’s why it is wise to speak to a financial professional to ensure you are making wise decisions when it comes to your retirement.

Closing value of some major equity indices.
S&P 500 chart at end of last week.

Data Sources: Yahoo Finance, WSJ

Join us for our next Meld University Event:

Preparing for Long-Term Care Expenses in Retirement presented by Blake May, J.D., CFP®. The webinar will be held on May 11th at 3:00 PM Central Time. There is no cost to attend, but you must register in advance.

 

Last Week's Riddle and Answer

Last Week's Riddle:
What is always on its way, but never arrives?

Last Week's Answer:
Tomorrow.

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