Happy Monday! U.S. stocks closed last week around new record highs despite a getting a slow start in the first few sessions. Both the S&P 500 and Dow closed the week at new record highs.
S&P 500 Futures are wobbling ahead of the open, but Dow contracts look more solid with a 0.3% gain in the pre-market.
Supply Shortages
Supply and labor shortages are causing sky-high prices in many consumer products. Oil prices are up 12% in just a month. Steel prices have tripled since this time last year. The prices of chicken breasts have doubled since January 20th, and eggs are up 4.7% just this month.
This list goes on and on and on, but those are just a few of the most shocking numbers. Producers say supplies are being hampered by labor shortages, and the availability of cheap cash is compounding the problem by overheating demand.
This is a scary set of circumstances for the U.S. economy. However, the Fed can probably stop it anytime they want with a rate hike. The economy has recovered to the point where it could probably take a rate hike in stride, but the stock market will almost certainty undergo a major correction if the Fed switches up its rate outlook. They're damned if they do and damned if they don't.
Unfortunately, this problem could get worse before it gets better. Treasury Sect. Janet Yellen and the Fed seem content to stand by and hope the problem corrects itself. Hopefully, this dangerous combination of aggressive spending and loose monetary policy doesn't result in runaway inflation, but it seems like it's certainly something investors are wathcing. Just look at the chart for U.S. Treasury Inflation Protected Securities (TIPS) and you'll see what I mean.
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