Confidence Crackdown - Kuby's Commentary 08.16.2021

So far 2021 has provided an incredibly smooth ride for investors, but the news flow last week suggested some turbulence on the horizon. The Delta Covid-19 variant cases and deaths surged, both consumer and producer prices spiked, consumer confidence plunged, and political wrangling in the U.S. House of Representatives cast doubt on the passage of the infrastructure bill. The S&P 500 gained 0.71% for the week to set another new record high on Friday, but small-cap stocks suffered a 1.1% decline. The U.S. Senate on Tuesday passed a $1 trillion infrastructure bill and immediately kicked off debate on a $3.5 trillion spending blueprint for President Joe Biden's key priorities on climate change, universal preschool, and affordable housing. Consumer prices rose by 5.4% in July as the reopening of the economy kept inflation elevated at levels that, according to the Labor Department's CPI report on Wednesday, matched the prior month's increase. The gains moderated on a monthly basis, but inflation remains much faster than it was before the pandemic. The U.S. consumer showed signs of fatigue from confronting the combination of the resurgence of the virus and higher prices, as the University of Michigan's gauge of consumer sentiment plunged in August to a reading of 70.2 from a final July reading of 81.2. Speaking of the consumer, earnings reports are due out from Walmart, Target, Lowe's, and Macy's. Additionally, on Tuesday retail sales for July are forecasted to show a 0.2% decline from the June tally.