Report (Premium Edition) 08-23-2021

Tip: Use this as a quick guide on the short-term direction (1-2 weeks) of key markets. It is not a signal to buy or sell, just to show the trend. This is a quick cheat sheet to know the trend and help understand what is happening with the markets in the short term. I started making this section years ago because once had a client that would call me nearly every day asking the direction of the markets.

S&P 5004441.680.52%23.074444.354406.8Bull
Crude (WTI)64.0813.49%2.1664.29161.72Bull
10 Year1.2751.35%0.0171.2831.26Bear
US Dollar Index93.245−0.23%−0.21393.50593.213Bull

Tip: Use this section to know the performance of various sectors, weight portfolios, or look for trades. Modern portfolio theory stresses the importance of diversification, but recently several sectors like technology have outperformed others like utilities. This is also a way to narrow the sectors to find investment opportunities.

REIT Alert: Due to Covid-19, there is a large percentage of people that have not paid rent or mortgages. We are very worried about the effect it could have on real estate investment trusts’ (REITS) value. Even though the sectors may trending bullish, we believe that REITs could have a significant drop in value.

Sector Name5-Day Return1-Month Return3-Month ReturnYTD ReturnYTD Return vs S&P 5003-Year Return5-Year ReturnTrend
 Basic Materials-3.30%4.00%-3.10%17.10%-2.00%45.40%84.00%Neutral
 Communication Services-0.70%1.60%6.40%20.00%1.00%71.70%68.60%Bull
 Consumer Cyclical-2.50%-1.00%4.20%13.00%-6.00%83.50%160.40%Neutral
 Consumer Defensive0.20%2.30%2.40%9.50%-9.50%42.50%51.90%Bull
 Financial Services-2.20%4.90%1.60%28.60%9.60%39.40%107.70%Bull
 Real Estate-0.20%0.70%9.60%27.10%8.10%42.20%47.60%Bull

Key Drivers for the Week of Aug 23, 2021

TIP – This is a 1-minute brief bullet-point summary. It is a tool that gives investors and financial a fast and simple list of what to watch for and talking points for the week.

  • Covid D & Shutdowns
  • Central bank normalization likely delayed as covid, other factors slow growth
  • Fed’s Jackson Hole meeting goes virtual, QE taper hints unlikely
  • U.S. data: home sales, durables, income, spending, Q2 GDP, sentiment
  • Treasury to auction $183 bln in coupons, including 2-, 5-, 7-year notes
  • BoK expected on hold; Japan services PPI, Tokyo CPI dye
  • ECB minutes awaited after Lagarde’s dovish presser at policy meeting
  • Europe PMI readings; German Ifo Business Climate, GDP 
  • UK preliminary PMIs likely to show slowing from robust recovery

Stocks & ETF Watch List

Tip: Use this section to find stocks and ETFs to add value to your portfolio by increasing the alpha (return) and decreasing beta (beta). Our list is updated monthly to help provide our readers with timely insights. Readers should do their own research before making any investment. In order to make our report easier to read, we are now including the stocks as lists for readers in separate posts.

  • Inflation Stock Picks: List of stocks that we think should perform better in a rising inflation environment. Click here
  • Auto Parts Stock Picks: Auto parts companies are likely to see their stocks rise as the average age of cars and light trucks increased from 11.9 years in January 2017 to 12.2 years in January 2021, according to new data from IHS Markit. Below are the top auto parts companies that investors should buy now before the profits roll in. Click here.
  • Solid Picks: This group of stock/ETF picks is likely to experience growth and perform well into the near future. Click here.
  • Dividend Stocks: List of stocks that have excellent dividends and business performance. Click here.
  • Dividend Growth Stocks: List of stocks that have a history of growing dividends. Click here.
  • Dividend ETFs Picks: This list of ETFs is selected for their ability to pay dividends. Click here.
  • Dogs of the Dow: This list of DOW stocks based on H. G. Schneider’s Article in the Journal of Finance in 1951 that used the price-earnings ratio. The general idea is that blue-chip companies that pay a dividend are more likely to withstand an economic downturn. Click here.

Week Ahead: Covid D Delays Fed Taper?


The threat to global growth from the Delta variant is weighing on sentiment. Further complicating outlooks are building worries over the efficacy of the vaccines, with booster shots now being prepared. 

Supply shortages also are crimping production and sales and are adding to uncertainties over the economy. However, normalization could be put off longer if the virus and the tighter restrictions take a bigger toll on growth than anticipated.  

Now geopolitical risks are adding to the global unease and continued rising inflation

As a result, FOMC is likely to delay any announcement of a QE tapering, which some had thought could be affected at this week’s Jackson Hole symposium until later in the fall. 

A lot of people have asked me if the market bubble is about to blow. The short answer is it is overdue for a 10% correction anytime. This doesn’t mean it will happen tomorrow, nor sell everything and buy gold coins.  

Market corrections are natural and occur every 7-10 years. There are several things I am watching:

  • The Fed: They are keeping the economy running and appear to be committed to do so.
  • Rising Inflation: Inflation historically has hurt many sectors of the stock market.
  • Covid: Just when we think we are over the virus, something happens to start the shutdowns.
  • Political/Debt/Shutdown: The rising national US debt and the fights in Congress could cause a drop in the markets.
Deere stock chart with 200MA

We may already be seeing the start of a dip. One of the stocks I like to watch is Deere and Company because it is a bellwether for the economy. The stock is down 7.76% in the last 5 days but up 71% for the year. Deere is optimistic and projected an increased quarterly revenue of 16% but is getting hurt by Goldman Sachs’s lowered economic projections.  

John Deer Stock Chart

As mentioned last week, the Federal Reserve is in a no-win scenario when dealing with the next financial crisis or recession. There’s a case that the Fed won’t allow the bubble to burst instead of reviving asset prices through more buying programs. If the Fed does nothing, they risk allowing a multi-trillion dollar bubble to unwind, which would likely plunge the United States into a depression.

The KC Fed’s annual Jackson Hole symposium highlights this week. But it has lost a lot of its luster after it was announced Chair Powell’s would not attend in person but instead would webcast his remark. Then the Fed decided to make the meeting entirely virtual amid a covid outbreak in Teton County. 

Though the Fed has used this venue in the past to drop policy hints, and even though the July minutes indicated “many participants” favored reducing asset purchase this year, we do not believe Powell will give any clues given the increase in downside risks. 

The minutes also revealed a wide mix of views on the path of the economy and inflation, not to mention QE, and those suggest the Fed is not ready to make a decision. Officials will also want to see the July jobs report on September 3. The view that there will be no hints over reducing asset purchases at this week’s meeting helped support Friday’s rally on Wall Street.

With the Jackson Hole meeting unlikely to produce any drama, attention will turn to data. After the divergent patterns seen in last week’s reports, we’ll look to the upcoming numbers to help further frame market interpretations of the macro-indicators heading into the September 21-22 FOMC. 

The US House returns to work Monday to consider passage of infrastructure spending and the John Lewis Voting Rights Act. Democrats are circulating briefing notes which explain why federal subsidies for many facets of life are necessary.

The voting rights bill will require same-day or automatic voter registration, prevent voter-roll audits without federal approval, and effectively ban voting identification. Democrats understand that passage of the two bills will reshape America and its elections for many years, despite the immediate political fallout.

The “Infrastructure Bill” made its way through the Senate with the support of both sides. There appears to be a massive gap in spending between the House (which is out for roughly five weeks) that wants $6 trillion and the Senate’s $1 trillion.

The debt ceiling has officially been passed, and Janet Yellen, Treasury Secretary, has been lobbying Congress to increase it before a government shutdown.

I think we are likely going to see a massive increase in spending and infrastructure bill pass in the name of “urgency” and to avoid a “shutdown” when the House finally returns. Inflation worries will be cast aside as the political left stuff the Infrastructure Bill with trillions of unfunded spending.

The current $28.5 trillion debt is the starting point as the two-year suspension of the debt ceiling occurred in 2019 but will expire at the end of July. Treasury Secretary Janet Yellen believes the federal government will hit its spending limit very quickly and said a default is “unthinkable.”

Senate Minority Leader Mitch McConnel (R-KY) said Republicans would not support increasing the US debt limit. 

The Senator said, “I can’t imagine a single Republican in this environment that we’re in now — this free-for-all for taxes and spending — to vote to raise the debt limit.” 

This makes me think there is a 50/50 chance of shutdown because Republicans appear to be unified against raising the debt limit.

The calendar includes home sales, durables, income, consumption, the second look at Q2 GDP, and consumer sentiment.

We expect a -0.3% dip in July existing home sales (Monday) to a 5.840 mln pace, in part due to supply constraints and in part due to record home prices. New home sales are projected bouncing 7.2% in July to a 725k clip, recovering from three months of hefty declines. 

July durable goods orders should rise 0.3%, extending the positive momentum for a third straight month. Q2 GDP growth should be revised up to a 7.2% rate of growth, versus 6.5% in the Advance report, supported by two massive rounds of fiscal stimulus. Personal income is expected to edge up 0.1% in July with consumption rising 0.9%. The final reading on August consumer sentiment is likely to be unchanged from the 70.2 preliminary print, a 10-year low.

This week’s supply slate will prove interesting after last week’s record-setting 10-year auction that was followed by the poor 30-year sale. The Treasury will be auctioning $183 bln in 2-, 5- and 7-year notes Tuesday, Wednesday, and Thursday, respectively. Though the Fed’s taper plans should be on hold for now, a rate hike is still in the cards for early 2023, if not late 2022 if the economy holds out. 

That may limit interest in the paper. Yields edged up on Friday as improved risk appetite helped the market set up for the offerings. The wi 2-year rose to 0.250%, with the wi 5-year at 0.800%, while the 7-year was at 1.070%.


Softer July data from China released last week indicated not all is well for the world’s second-largest economy. After leading the globe out of recession, the economy has been slowing and that is likely to continue, especially given the CCP’s crackdown on tech businesses and the zero-Covid policy, which has locked down large swaths of the economy over the past several weeks. It’s likely deceleration in economic activity in China will soon spill over to the global economy, as supply chains are further impacted.

Aside from China, Japan and much of Southeast Asia continue to be impacted by exploding Delta cases. Big picture, the growth picture over the second half of the year has deteriorated significantly since the spring. This week’s regional calendar finds China’s docket empty. In Japan, August Tokyo CPI is the only top-tier data release. Elsewhere, trade, prices, and production data dominate. The only central bank meeting comes from South Korea’s BoK, where no change to its 0.50% repo rate is expected.

In Japan, July services PPI (Thursday) is seen inching up to a 1.5% y/y pace from 1.4%. This would be a fourth straight month of a better than 1% growth rate. August Tokyo CPI (Friday) is penciled in at a flat y/y overall, from -0.4%, and would be the first non-negative print since September 2020. The core rate should pick up to a 0.1% y/y clip from -0.3%. 

South Korea’s central bank, the BoK meets (Thursday) and will likely keep its repo rate unchanged at 0.50%. The Bank had been looking to increase rates by year-end, though resurgent Covid has likely pushed back those expectations. The bank has been easing policy since the 25 bp cut in July 2019 to 1.50% from 1.75%. It last raised rates in November 2018. August consumer sentiment (Tuesday) is expected to improve to 104.0 from 103.2. 

Taiwan July industrial output (Monday) should slow slightly to a 15.0% y/y pace from 18.4% previously. The July unemployment rate (Monday) is expected at a steady 4.8%. July leading indicators are due Friday.

Malaysia July CPI (Wednesday) is estimated at 3.5% y/y from 3.4%. The July trade report (Friday) should see the surplus narrow to MYR 20.0 bln from MYR 22.2 bln.

Thailand July exports (Tuesday) are forecast slowing to 22.3% y/y after more than doubling to a 43.8% y/y clip in May. July manufacturing production (Thursday) should slip to 13.0% y/y from 17.6% in June. 

Hong Kong July trade (Thursday) is expected to see the deficit narrow slightly to HKD40.0 bln from 40.5 bln. 

Singapore July CPI (Monday) is penciled in edging up to 2.5% y/y from 2.4% in June. Prices have risen and have been back in positive territory since January, and picking up a bit of steam the last several months to a 2% handle. July manufacturing production (Thursday) is forecast slowing to a 20.0% y/y rate versus the previous 27.5%. The latter was the fastest since November 2010.

In Australia, it is a light docket, with just Q2 private new capital expenditures due (Thursday). Expectations are for a 4.0% increase versus the 6.3% rise seen in Q1. There are no RBA speeches or events scheduled. 

New Zealand has Q2 retail trade (Tuesday) expected up 3.0% from 2.5% in Q1. The July trade report (Tuesday) should see the surplus steady at NZ$0.3 bln. Q2 trade prices are due Tuesday as well.


Eurozone: geopolitical risks have added to virus concerns, although the central scenario remains that the impact of the pandemic and virus variants on activity in the U.S. and Europe will be limited, thanks to high levels of vaccinations, with preparations for booster shots for the most vulnerable apparently already underway.

Against that background, the minutes to the last ECB meeting (Thursday) will be interesting. There the central bank strengthened its guidance on rates. Usually, the report doesn’t give too much away, but while Lagarde was eager to deliver a very dovish message on the rate outlook, she was very cagey on tapering and the future of the PEPP program. Some council members clearly are eager to start taking the foot off the accelerator at least a bit, although the final decision on PEPP, which is currently set to end in March next year, is unlikely to be taken before December.

The highlights of the data calendar are confidence readings, with both preliminary PMI readings and the German Ifo due. The former kicks off the week on Monday and we expect a slight drop in the headline Markit composite PMI to 59.7 (median 59.6) from 60.2 in July. The manufacturing sector continues to face supply chain disruptions and capacity constraints, which means orders have been piling up while production levels have been looking weaker than hoped.

The services sector meanwhile is likely to nudge higher from the already strong 59.8 in June, as the EU’s vaccine program has helped to secure largely unhindered holiday travel, at least within the bloc. All in all still a picture of robust health, with growth evening out across sectors and countries, but with virus developments still creating some uncertainty over the outlook.

We also expect German Ifo Business Climate (Wednesday) numbers to correct and see a decline in the headline to 100.1 (median same) from 100.8 in July, driven mainly by a deterioration in the expectations reading thanks to global bottlenecks in some areas, signs that the recovery in China is slowing down and that virus developments may at least slow the global recovery. The current conditions indicator meanwhile is likely to improve further thanks to strength in the services sector.

The second reading of German GDP (Wednesday) meanwhile is expected to confirm a quarterly growth rate of 1.5% q/q that was reported with the preliminary release. A less strong rebound than initially anticipated, with bottlenecks in the global manufacturing sector a major reason. The breakdown, which will be released for the first time, is expected to confirm that private consumption was the main driver of overall activity as the society re-opened. The second reading for French GDP (Friday) is also not expected to bring major revisions and confirm the quarterly rate at 0.9%.

The calendar also has French business confidence and private consumption data as well as Eurozone M3 data.

U.K.: data last week showed an unexpected contraction in UK July retail sales and a dip in UK August consumer sentiment numbers, alongside a sharp abatement in inflation in July data, which saw headline CPI dropping to 2.0% y/y, well off the median forecast for 2.3% and down on June’s 2.5% y/y rate. This, along with concerns about the global impact of the delta wave of the pandemic, should reduce the pressure on the BoE to tighten policy.

A sharp focus remains on the pandemic in the UK. The country has vaccinated the majority of its adult population and the link between infections and serious illness and death has so far been severed. However, the experience of Israel is a worry.

Israel was ahead of the UK in vaccinating its population but is now seen a fourth wave that is starting to look as bad as previous waves in terms of the rate of new infections and deaths. The reason being stated is a combo of the delta variant and declining immunity in people who received the Pfizer vaccine. Booster shots may be the answer, while other vaccines, such as the AstraZeneca version may be giving long-term protection. The AstraZeneca vaccine has been the most commonly administered vaccine in the UK.

The UK calendar is fairly quiet, with the preliminary release of August PMI surveys the main highlight (Monday). The report is expected to show private sector activity moderating slightly, but to still indicate overall robust levels of expansion. The median forecast for the composite PMI is for a 58.4 reading in August, down from 59.2 in July.

Switzerland: The calendar is quiet this week.

Data Week of August 23

We have a heavy release schedule in the last full week of August. We expect a Q2 GDP growth boost to 7.2% from 6.5%, alongside a 0.1% July personal income gain and another solid consumption rise. We expect a further July climb for durable orders, while advance indicators reveal a July narrowing in the goods trade balance and a further wholesale and retail inventory climb. We expect a July moderation in existing home sales but a climb for new home sales, with median prices that are just below their Q2 all-time highs. Claims should continue to tighten, though at a less robust clip than seen in recent weeks.

Week of August 23

We saw a couple of divergent patterns in the data over the past week that will frame market interpretation of the macro-indicators as we approach the September 21-22 FOMC meeting. We saw a steep pullback in the preliminary Michigan sentiment reading for August to a 10-year low of 70.2 that may reflect the ongoing spread of the delta variant, though the pullback may have also been impacted by the return of the 5-10 year inflation gauge to its 10-year high of 3.0%. We’re also seeing a further pull-back in producer sentiment, given August declines for the Empire State and Philly Fed reports, while price gains in those surveys mostly gained steam.

Yet, falling energy prices through the week suggest that we’ll get some inflation reprieve with the August and September inflation reports, and easier comparisons will allow the y/y inflation metrics to start moderating from peaks over the June-August period for the various measures. Price gains remain impressive with the wide array of supply chain disruptions in the economy, though some moderation in at least some measures is on the horizon.

We will also see further trade disruptions in August and September, and associated supply-chain disruptions, with the partial closure of the Ningbo port in China, alongside production cutbacks at Toyota due to semiconductor shortages and virus outbreaks in southeast Asia. The boost to retail sales from Q1 stimulus spending and vaccines is continuing to unwind, and with further vehicle inventory constraints, we now assume -0.5% retail sales drops in both August and September.

The FOMC minutes from the July 27-28 meeting were released, and these highlighted the risk that the Fed will move faster than previously expected on implementing the taper, due to ongoing upward pressure on prices. These minutes pre-date the August pullback in confidence and producer sentiment, the rise in the Delta variant, falling energy prices, and further vehicle sector and trade disruptions. We expect these headwinds, combined with the start of a y/y inflation pullback, to trim pressure on the Fed to act at the September meeting. We will continue to assume that the Fed announces the taper in November for a start in January.

Existing Home Sales: 5.840 mln

We expect existing home sales to slip -0.3% to a 5.840 mln pace in July, down from 5.860 mln in June, versus a 14-year high of 6.860 mln in October. Pending home sales fell -1.9% in June after jumping 8.3% in May. The MBA purchase index fell -2.4% in July after big declines through Q2, and we set a 15-month low at month’s end. The recovery in all the housing measures stalled in Q2 as the sector encountered a wide array of capacity constraints that are driving prices higher and capping sales. The months’ supply of homes posted a 5-month string of new all-time lows through January to a particularly tight 1.9, before rising to a still-lean 2.6 through June. The median sales price is pegged at $362,000 in July, slightly below the all-time high of $363,300 in June. We expect a dip in the y/y median price gain to 18.5% from 23.4% in June, and a record-large 23.6% in May. In Q2, we saw an average sales pace of 5.830 mln, after a 6.303 mln rate in Q1, and we expect a slower 5.817 mln pace in Q3.

New Home Sales: 725k

We expect a 7.2% July climb for new home sales to a 725k pace, following a June dip to 676k from 724k in May. The May and June sales rates sat below the high from the last cycle of 756k in January of 2020, after an 11-month stretch of overshoots that marked the highest rates since a 778k figure in July of 2007. We expect a median sales price bounce to $379,000 $361,800 in June and a $380,700 all-time high in May, leaving a y/y increase of 14.9%. We expect a 768k Q3 pace for new home sales, after a 728k rate in Q2. We’re seeing rapid growth in demand for new homes in 2021. Construction has lagged sales, and the market is heavily inventory-constrained. We expect a steady climb in starts and completions through 2021 in the face of unprecedented home demand, though the sector is pressing against capacity constraints, and growth in sales beyond lofty late-2020 levels has proven hard to sustain.

Durable Goods Orders: 0.3%

Durable goods orders are expected to rise 0.3% in July with a flat figure for transportation orders, after a 0.9% headline increase in June that included a 2.0% transportation orders increase. The durable orders rise ex-transportation is pegged at 0.4%, after a 0.5% June increase. A defense orders gain is pegged at 3.9%, following a -3.5% June dip. Boeing orders dropped back to 31 planes after surging to a 3-year high of 219 in June. The vehicle assembly rate should rebound to 9.7 mln from 8.8 mln in June. Durable shipments should rise 1.0%, and inventories should rise 0.9%. The I/S ratio is expected to hold steady at 1.80 for a third consecutive month in July, versus a 2-year low of 1.74 in January and an all-time high of 2.39 in April of 2020 for a series extending back to 1992.

Preliminary Q2 GDP: 7.2%

We expect a Q2 GDP growth boost to 7.2% from 6.5%, with hikes of $22 bln for consumption, $13 bln for inventories and $1 bln for private construction, but downward bumps of -$4 bln for net exports and -$2 bln for public construction. The Q2 GDP growth pace is a good gauge of the “speed limit” for the economy, given widespread supply constraints. The Q2 GDP figures document a continued consumption boom from two rounds of fiscal stimulus during Q1 and vaccine distributions, a diminished updraft for business fixed investment, and a pull-back in residential investment activity following an enormous boom to a Q1 peak. Exports and imports continued to climb sharply, and net exports continued to subtract from GDP. Inventories liquidated further through Q2, and were in net liquidation through four of the last six quarters, as capacity constraints have limited the ability of producers to meet demand.

Initial Jobless Claims: 346k

Initial jobless claims are expected to fall -2k to a 346k new cycle-low, after a drop to a 348k prior cycle-low in the BLS survey week from 377k. Claims tightened in July, widened in late-July, and are tightening again now due to counter-swings relative to the auto retooling seasonal pattern, which likely didn’t occur much this year due to semiconductor shortages. Claims are poised to average 353k in August, after averages of 393k in July, 394k in June, and 428k in May. The 348k August BLS survey week reading was well below last month’s reading of 424k, as well as the 418k in June, 444k in May, and 566k in April. We assume an 800k August payroll rise, following a 943k July gain.

Continuing claims fell by -79k to a 2,820k cycle-low in the week of August 7, following an upwardly revised 2,899k figure. We expect continuing claims to decline 30k to a 2,790k new cycle-low for the week ending August 14. Continuing claims have fallen sharply over the past three weeks, and we assume some flattening in this steep downtrend. Continuing claims are on track to fall by a hefty -506k between the July and August BLS survey weeks, after drops of -116k in July, -199k in June, -42k in May, -188k in April, -628k in March, -409k in February, and -555k in January.

Advance Indicators Goods Deficit: -$90.5 bln

We expect the advance indicators report to reveal a July narrowing in the goods trade balance to -$90.5 bln from an all-time wide -$92.1 bln in June. We expect exports to grow 1.7% to $147.7 bln, while imports grow 0.4% to $238.2 bln. Oil prices rose through July, hence providing a lift for petroleum sector trade, while trade in vehicles likely remained depressed in July after a mixed pattern in June and big prior 2021 declines through May attributable to semiconductor shortages. We expect a -$33 bln bilateral goods balance between the U.S. and China with elevated imports as U.S. businesses rebuild inventories largely with imported goods. We saw a -$43.1 bln all-time wide bilateral gap in October of 2018. The advance report should also reveal a July gain of 1.3% for wholesale inventories and 0.4% for retail inventories.

Personal Income/Consumption: 0.1%/0.6%

We expect a 0.1% July personal income gain after the 0.1% June uptick, with a 0.9% July rise in compensation. The compensation rise reflects a 0.4% July gain for hourly earnings and a 0.9% rise for hours worked. We expect a -2.0% July drop in “current transfer receipts” after a -2.0% June decline, as this measure tracks the pull-back in stimulus spending. We expect a 0.6% rise in consumption after a 1.0% June gain. We expect a savings rate drop to 9.0% in July from 9.4% in June, versus prior stimulus-induced peaks of 26.9% in March, 20.2% in January, and 33.8% in April of 2020. We peg disposable income growth at -2.8% in Q3, after a -26.1% plunge in Q2 and a 63.7% surge in Q1. We expect a growth rate for real consumption of 2.9% in Q3, after growth rates of 11.8% in Q2 and 11.4% in Q1.

Michigan Sentiment, final: 70.2

We don’t expect any revision yet for the final Michigan sentiment report, following a preliminary report that revealed a huge August drop to a 10-year low of 70.2 that undershot the pandemic-bottom of 71.8 in April of 2020, from 81.2 in July, versus a cycle-high of 88.3 in April. The August drop reflected a huge decline in expectations to an 8-year low of 65.2 from 79.0 in July and an 83.5 cycle-high in June. We also saw a decline for current conditions to a 16-month low of 77.9 from an 11-month low of 84.5 in July, versus a 97.2 cycle-high in April. The 1-year inflation gauge slipped to 4.6% from a 13-year high of 4.7% in July, versus a prior 13-year high of 4.6% in May that matched highs in April and March of 2011. The 5-10 year inflation measure rose back to the 10-year high of 3.0% last seen in May, and previously in 2013, from 2.8% in June and July. Confidence faces a mounting headwind from the delta variant and resumed mask requirements, while the prior confidence updraft with stimulus and vaccines appears to have dissipated since April. We expect drops in all the major confidence measures in August, following July declines for all except for the Conference Board index.

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