Report (Premium Edition) Updated 05-24-2021

Key Market Trends

Tip: Use this as a quick guide on the short-term direction of key markets. I once had a client that would call me nearly every day asking the direction of the markets. This is a quick cheat sheet to know the trend and help understand what is happening with the markets in the short term.

  Last CHG % CHG HIGH LOW TREND
Dow 34207.85 0.36% 123.69 34415.48 34121.91 Bull
S&P 500 4155.87 −0.08% −3.26 4188.72 4151.72 Bull
Crude (WTI) 64.852 1.57% 1 64.879 63.613 Bull
Gold 1881.71 0.07% 1.34 1874.99 1886.9 Bull
10 Year 1.618 −0.10% −0.002 1.628 1.611 Neutral
Bitcoin/USD 36540.98 5.28% 1834.19 37391.65 34426.21 Neutral
US Dollar Index 89.889 −0.15% −0.139 90.103 89.865 Bear
VIX 20.32 0.84% 0.17 20.51 20.18 Neutral

S&P 500 Sector Trends

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 Name 5-Day Return 1-Month Return 3-Month Return YTD Return YTD Return vs S&P 500 3-Year Return 5-Year Return Trend
 Basic Materials -1.60% 4.70% 16.20% 21.20% 10.20% 47.30% 105.60% Bull
 Communication Services -0.20% -0.10% 3.40% 12.50% 1.50% 66.50% 64.90% Bull
 Consumer Cyclical -1.40% -4.40% 0.50% 8.10% -2.90% 88.40% 163.50% Bear
 Consumer Defensive -0.20% 1.00% 9.50% 7.00% -4.00% 54.60% 57.90% Bull
 Energy -2.20% 10.20% 14.60% 41.50% 30.50% -25.20% -6.30% Bull
 Financial Services -0.80% 6.30% 15.60% 27.70% 16.70% 39.40% 116.20% Bull
 Healthcare 0.90% -0.40% 4.30% 7.60% -3.40% 59.00% 104.10% Bull
 Industrials -1.60% 1.40% 11.00% 16.20% 5.20% 44.40% 105.90% Neutral
 Real Estate 0.80% 0.10% 10.70% 15.90% 4.90% 43.40% 46.60% Bull
 Technology 0.40% -4.50% -2.00% 3.50% -7.50% 108.00% 265.90% Bear
 Utilities 0.20% -1.70% 7.40% 5.90% -5.10% 44.00% 60.60% Bull

Week Ahead: The Big “T”-Debate– Taper and Transitory

Key Drivers for the Week of May 24, 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.

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  • Tapering and transitory remain a major focus of the markets
  • U.S. monitors confidence, growth and inflation amid growing tapering jitters 
  • Fedspeak slated with Brainard, Mester, Bostic, George, Barkin, Evans, Quarles
  • Treasury to auction $183 bln in new 2-, 5-, 10-year maturities
  • CB meetings: RBNZ, Bank of Korea, Bank Indonesia expected on hold
  • Japan reports services PPI, Tokyo CPI, unemployment, and job offers ratio
  • Whit Monday holiday to slow action in Europe; Canada closed Monday 
  • Eurozone ESI confidence; German Ifo sentiment, GfK confidence, GDP
  • UK public sector net borrowing, distributive trades survey due 
  • Switzerland releases trade and KOF leading indicator

Introduction (Quick Overview)

On May 17, 2021

Uncertainty over the timing of central banks’ “T”apering discussions and growing doubts regarding the “T”ransitory nature of the inflation surge should drive market action this week after being responsible for the choppy moves last week.

In the U.S., another busy week of Fedspeak will be looked to for assurances that the ultra-accommodative policy setting will remain in place for some time even as prices surge. Inflation will remain front and center, with the price indicators in the consumer sentiment measures and personal consumption releases sure to draw attention, although the data slate will not add anything new to the recovery/reflation story.

A key issue that is not directly being talked about is the weakening of the US Dollar which is inflation. There is risk that if this trend continues, there could be severe market complication if it drops in the low 80 or below. The chart above shows the USD breaking through Support level 1 at 90. The decrease in value below 80 would definitely be a catalyst for a replacement of the USD as the world currency. Our speculation is that Chinese’s Yuan, which is currently undervalued, would take up much of the market share the USD would lose.

In the Eurozone, data releases should confirm the recovery story.

Monday is a holiday in many European countries. Asia will remain focused on rising Covid cases and deaths, but regional inflation figures and central bank meetings will be monitored.

NORTH AMERICA

The focus remains on the dynamics of the robust recovery, rising inflation, ongoing bouts of virus infections, and widening distribution of vaccines. The ups and downs in the economic data have made for more volatile markets. A slightly hawkish take on the FOMC minutes added to the gyrations last week, though it was not surprising that some on the FOMC suggested that maybe they should start to think about talking about tapering. There isn’t a lot on the upcoming week’s calendar to provide any new directional clues.

There are a few U.S. reports that may be of interest, notably May consumer confidence (Tuesday) and the April income/consumption release (Friday) that also includes the PCE price indexes. Confidence is seen dipping to 120.0 after rising to a 14-month high of 121.7 in April. The final May Michigan sentiment report (Friday) is seen repeating the preliminary reading of 82.8, which is a -5.5 point drop from cycle-high of 88.3 in April. A -14.0% pull-back in personal income for April is projected after the 21.1% March surge due to the stimulus payments. Consumption is projected rising 1.2% the 1.0% March gain. The price indicators may be of the most interest — in March there was a surge in the y/y chain price gauge to 2.3% from 1.5% (was 1.6%), while the y/y core rose to 1.8% from 1.4%. Finally, Q1 GDP (Thursday) should be lifted to a 6.7% growth rate in the second release from the preliminary 6.4% gain. GDP is projected to accelerate to a 8.5% rate in Q2.

The Fedspeak docket is loaded with several key policymakers at the mic. The markets will want to hear just how close they are to starting to talk about tapering. However, none will be definitive. Governor Brainard, a dove, will be at a crypto-currency conference (Monday). The more hawkish Mester, a non-voter, discusses diversity and central bank communications (Monday). Bostic, a voting dove, will speak (Monday) on the policy response to covid. Also George, a one-time hawk but more of a centrist (and a non-voter) will be at an agricultural symposium. Evans, a voting dove, speaks (Tuesday) on policy and the economic outlook. The centrist Barkin, who is also a voter, gives his views on the economy (Tuesday). Then Fed governor Quarles testifies (Tuesday, Wednesday).

Treasury auctions will be closely monitored to gauge demand for Treasuries. Auctions have been generally seeing modest demand, even at higher yields. The Treasury will sell $183 bln in shorter coupons. The offerings include $60 bln in 2-year notes (Tuesday), $61 bln in 5-year notes (Wednesday), and $62 bln in 7-year (Thursday). When issued yields at the time of the supply announcement saw the 2-year at 0.160%, the 5-year at 0.850%, and the 7-year at 1.315%. As of Friday’s close the respective rates were 0.165%, 0.845%, and 1.305%. Stops at these rates would be the highest or near the highest in over a year.

Earnings: Monday’s slate is empty. Tuesday has Intuit, Agilent Technologies, AutoZone, Zscaler, and Heico Corp. Wednesday brings NVIDIA, Bank of Montreal, Snowflake, Workday, Agilon Health, and Amerco. Thursday has Salesforce.com, RBC, TD Bank, Dell Technologies, Vmware, CIBC, Dollar General, HP, Veeva Systems, Best Buy Dollar Tree, Burlington Stores, Ulta Beauty, Gap, and Autohome. Friday is empty.

Canada’s data docket is thin, lacking top tier releases this week. Monday is a holiday. Average weekly earnings for March are due Thursday. Statistics Canada publishes the advanced estimate for April manufacturing sales (Tuesday). The CFIB’s Business Barometer sentiment index is also due Thursday. While not a market mover, the report does give an early read on Canada’s economy. The index fell to 63.4 in April from a lofty 68.2 in May as the return of restrictions weighed on the outlook. BoC Deputy Governor Lane (Wednesday) is on a virtual panel discussing digital currencies in Canada. The next scheduled event is the policy announcement on June 9.

ASIA

The focus in Asia will remain on Covid, with the region still struggling with increasing cases and deaths. Aside from India, which continues to be slammed by the virus, Japan, Taiwan, Thailand, Hong Kong and Singapore have all implemented some restrictions on business and movement of people. Aside from the virus, attention remains on global inflation, which has ramped up due to heavy demand from reopenings, while supply shortages become more pronounced, in large part due to supply chain disruptions. This week’s economic docket is fairly light, though there are some key data releases. Japan will reveal Tokyo CPI and unemployment (Friday), with the balance of the month-end data surge due on the following Monday, May 31, when industrial production and retail sales are on tap. China’s calendar is empty. Around the rest of the region there is a mix of price, growth, production and trade data due. For central banks, Bank of Korea, Bank Indonesia and New Zealand’s RBNZ meet, with all seen on hold, with rates at 0.50%, 3.50% and 0.25%, respectively.

In Japan, April services PPI (Wednesday) is seen at an unchanged 0.7% y/y pace. Prices have bounced from the declines from October through January. May Tokyo CPI (Friday) is penciled in at -0.4% y/y from -0.6% overall. It’s been in deflation since October. The core rate is expected to fall to a -0.3% y/y rate from -0.2%. It has been in negative territory since August. April unemployment (Friday) is expected to rise to 2.8% from 2.6%, while the ratio of job offers to seekers was likely steady at 1.10. Taiwan April unemployment (Monday) is forecast at an unchanged 3.7%. April industrial output (Monday) is estimated to have risen 25.0% y/y from 16.8% previously. April leading indicators are due Thursday. South Korea’s BoK meets (Wednesday) with no change to its 0.50% repo rate expected. May consumer sentiment will be released on Wednesday.

Indonesia’s Bank Indonesia meets (Tuesday) with no change expected to its 3.50% 7-day reverse repo rate. Malaysia April CPI (Wednesday) likely spiked to 5.7% y/y from 1.7%, while the April trade report (Friday) should see the surplus narrow to MYR 20.0 bln from MYR 24.2 bln. Thailand April manufacturing production (Wednesday) is forecast popping to a 15.0% y/y clip from 4.2% in March. Hong Kong April trade (Thursday) should see the deficit narrow to HKD 20.0 from HKD 27.0 bln. Singapore April CPI (Monday) should heat up to 2.1% from 1.3%. April manufacturing production (Tuesday) is penciled in slowing to a 4.0% y/y rate versus the 7.6% increase in March. Q1 GDP (Tuesday) is expected to be revised to 1.0% y/y from the preliminary 0.2%.

In Australia, a thin schedule is on tap, with Q1 private capital expenditures (Thursday) seen climbing 3.5% following the 3.0% gain in Q4. There is nothing from the RBA this week, but the bank does meet next week (June 1). To review, the bank left policy unchanged in May, as expected, but upgraded the economic outlook to a 4.75% gain in GDP this year. The RBA suggested that July will bring a review of the yield target and quantitative easing. Interest rates, however are set to remain at emergency levels until at least 2024. The RBA repeated that the “board is committed to maintaining highly supportive monetary conditions” and “prepared to undertake further bond purchases to assist with progress toward the goals of full employment and inflation”, while placing “a high priority on a return to full employment.” There was nothing unexpected from the RBA, but the comments added to speculation that central banks will begin to taper purchases in the second half of this year — depending on virus developments and vaccine rollouts. No change in policy is expected at the June meeting.

New Zealand: Attention will be centered on the RBNZ, which is expected to announce no change to its current 0.25% setting for the policy rate. The April trade report (Wednesday) and Q1 retail sales (Monday) will also be of interest, but the RBNZ will be the focus this week.

EUROPE

Eurozone: the week starts with a public (if not market) holiday in many countries which is taking place against the background of generally improving optimism that the Eurozone is on the way out of the pandemic gloom and heading for a re-opening of economies and borders in time for the summer holidays. At the same time, central bank officials have so far managed to keep spreads in and prevent rates from rising too quickly, which is keeping the DAX near record highs. However, the central bank’s generous monetary policy also risks fueling already existing imbalances. Still, with the recovery in the Eurozone lagging developments in the U.S. the ECB won’t be moving before the Fed and will likely want to keep its options open until the policy path in the U.S. is clearer.

Data releases this week are expected to confirm the recovery story. German Q1 GDP (Tuesday) is expected to be confirmed at a dismal -1.7% q/q, largely due to lockdown measures. Germany actually escaped a technical recession and confidence data suggests a strong rebound in the second quarter, led by manufacturing, but with services catching up as vaccination programs continue and restrictions are lifted.

After a strong round of PMI readings, the German Ifo Business Climate (Tuesday) is expected to lift to 98.2 (median 98.0) from 96.8 with both expectations and current conditions reading seen advancing further. The services sector is finally strengthening and manufacturing is bursting at the seams, with companies increasingly unable to fill existing orders amid supply chain constraints. Delivery times are lengthening and companies are increasingly able to pass on higher input costs, if PMI reports are anything to go by. PMIs also suggest that the recovery is not just broadening across sectors, but also countries. The Eurozone ESI Economic Confidence (Friday) is expected to reflect this. We see the headline at 111.9 (median 112.0) in May, up from 110.3 in April.

Against the background of strengthening growth and rising producer price inflation, preliminary CPI numbers for May will likely attract some attention. While the bulk of the figures are due the following week, France will kick off with HICP numbers (Friday). We are looking for a rise to 1.7% y/y (median same) from 1.6% y/y. Inflation differences increasingly vary across countries and while the French reading is still below the ECB’s implicit target, the Bundesbank warned that Germany’s headline could top 4% this year. Base effects and temporary factors are the main drivers though, so the ECB will be able to see through these numbers without having to raise rates any time soon.

However, pressure to take at least the foot off the accelerator is likely to increase if there are no further setbacks on the virus front. The central bank heads of Germany and France are both scheduled to speak next week and comments are likely to reflect increasing diversions on the policy outlook.

U.K.: the UK economic and event calendar is on the quite side this week. The UK’s successful Covid vaccination program is continuing at a pace, with 71% of the adult population having received at least one dose of a vaccine. There is also evidence that the vaccines are effective against the highly transmissible Indian variant. The prognosis for the months ahead is good for the UK economy, which remains on track for a full reopening by mid June. Continental European economies are also on a reopening path, and the capacity for vaccine production capacity continues to grow globally.

Switzerland: the calendar features April trade data (Thursday) and the May release of the KOF leading indicator (Friday).

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 weekly 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

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 are 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.

Economic Data Calendar

The last full week of May includes the first revision for Q1 GDP growth, where we expect a lift to 6.8% from 6.4%. We expect a big April personal income pull-back and a solid consumption gain after big March increases for both. Durable orders should climb further in April, while the trade balance for goods widens to a new all-time wide. We expect a big April wholesale inventory gain, but an auto-led retail drop. We expect an April dip for new home sales from a 15-year high, and a May consumer confidence drop from a 14-month high.

Complete Calendar: Click here to view the complete complete calendar of all the events.

Below are the key events, forecasts and information for the week:

Week of May 24

The reports of this last week confirm that the housing market is bouncing by less than expected at the year’s start, in terms of transactions volume and new construction, as listings remain lean. Yet, prices are soaring alongside shortages of labor, land, and building materials, as the market is robust despite limited transactions and constrained growth in new product.

Housing starts moderated by more than expected in April from their 15-year high in March. Building permits rose modestly, but still remain below their 15-year high from January. Both starts under construction and completions disappointed, as builders struggle to bring new homes to market. Indeed, lumber prices have fallen back considerably, as various shortages on other fronts have left more lumber on the shelves than once feared.

Existing home sales also document that transactions are heavily supply-constrained, with soaring prices, tight inventories, and limited transactions. The median price soared 4.7% in April to a second consecutive all-time high, of $341,600, leaving a record-large y/y gain of 19.1%. The median price is now well above the prior all-time high of $313,000 last October, which itself capped a string of four consecutive new highs. Before the pandemic, the all-time high was just $285,400 in June of 2019. The median is now 28% above that level.

Of course, the transactions figures are still high, even if short of early guesses. Despite a three-month string of drops, existing home sales over the last ten months were at rates not seen since 2006, and sales are tracking a solid 9% gain in 2021. It appears that households are unwilling to relinquish their homes at a rate faster than this, despite huge price gains.

Restraint in housing transactions is absent in the producer sentiment gauges for May. The Philly Fed headline posted a big May pullback from a 48-year high, but the ISM-adjusted measure rose to a third consecutive 48-year high, alongside new 41-year highs for both prices paid and prices received. The Empire State posted a May drop from a 3-year high, but the ISM-adjusted Empire State remained at the 15-year high from April. Prices paid and prices received from that survey also rose, in that case setting new all-time highs for both.

We are clearly pushing against capacity constraints for the goods sector of the U.S. economy, even as the service sector continues to re-open. The service sector industries may undershoot their pre-pandemic trajectories for a while, and we have yet to see how quickly former workers from the service sector will reenter the labor market as goods sector employees. Until then, pockets of joblessness in urban areas will coincide with tight national labor markets.

Consumer Confidence: 120.0

Consumer confidence is expected to slip back to 120.0, after a pop to a 14-month high of 121.7 from 109.0 in March, versus a 6-year low of 85.7 in April of 2020. This compares to an 18-year high of 137.9 in October of 2018 and a recession-low of 25.3 in February of 2009. We expect the present situation index to ease to 127.4 from a 1-year high of 139.6, versus a 7-year low of 68.4 in May of 2020, a 19-year high of 176.0 in August of 2019, and a recession-low of 20.2 in December of 2009. The expectations index should rise to a 31-month high of 115.0 from a 109.8 prior high in April, versus an 18-year high of 115.1 in October of 2018 and a recession-low of 27.3 in February of 2009. We expect the 1-year inflation measure to rise to a new 12-year high of 6.8% from a prior 12-year high of 6.7%. The steep confidence climb with vaccine distributions, stimulus deposits, and the easing of coronavirus restrictions may have peaked, given May pullbacks in Michigan sentiment and the IBD/TIPP index, though the weekly Langer index continues to rise.

New Home Sales: 950k

We expect a -7.0% April dip for new home sales to a 950k pace, following a big rebound to a 15-year high pace of 1,021k in March from a weather-depressed 846k in February. We’ve seen a 10-month stretch of sales through March that are the highest rates since a 1,016k reading in September of 2006. We expect a median sales price rise to $352,000 from $330,800 in March, versus an all-time high of $365,300 in December, leaving a y/y increase of 13.5%. We expect a 942k Q2 pace for new home sales, after a 959k rate in Q1. Growth in new home construction has lagged sales, which are inventory-constrained, and we’ve seen headwinds from mortgage rate gains, labor shortages, and elevated construction costs that have capped affordability. Though the housing starts report for April was disappointing, we expect persistent strength in all the housing data through mid-2021 in the face of unprecedented home demand.

Durable Goods Orders: 1.2%

Durable goods orders are expected to bounce 1.2% in April with a 1.5% increase in transportation orders, after a 0.8% headline increase in March that included a -1.6% transportation orders drop. The durable orders rise ex-transportation is pegged at 1.0%, after a 1.9% March increase. A defense orders drop is pegged at -0.9%, following a 1.0% March rise. Boeing orders eased to 17 planes after a surge to a 2-year high of 196 in March, versus a solid 90 in December with the lifting of the 737 MAX grounding. The vehicle assembly rate dipped to 9.0 mln in April from 9.5 mln in March. Durable shipments should rise 1.0%, and inventories should rise 0.9%. The I/S ratio is expected to sustain the March drop to 1.68 from 1.71 in February, versus a 2-year low of 1.63 in January and an all-time high of 2.24 in April of 2020 for a series extending back to 1992.

Preliminary Q1 GDP: 6.8%

We expect a Q1 GDP growth boost to 6.8% from 6.4%, with hikes of $17 bln for consumption, $3 bln for private construction, $2 bln for net exports, and $1 bln each for wholesale inventories, factory inventories and equipment spending. We expect a -$5 bln trimming for public construction and a -$1 bln trimming for retail inventories. The firm Q1 GDP gain documents the updraft from vaccine distributions and two rounds of fiscal stimulus during Q1, alongside a seasonal Q1 updraft after the Q4 downdraft attributable to the mismatch of seasonal factors with this year’s disrupted holiday activities. Much of the gyration was in consumption, which stalled in Q4 but surged in Q1, alongside moderating growth in residential and nonresidential fixed investment. Inventories subtracted sharply from GDP in Q1, as businesses were unable to keep up with demand. Imports were robust, though gains were restrained by port backlogs, while exports have been restrained by weak growth abroad.

Initial Jobless Claims: 440k

Initial jobless claims are expected to fall to -4k to 440k, following the BLS survey week’s drop to 444k from 478k. Initial claims have turned sharply lower over the past six weeks, following a restrained drop-back through the start of April from the holiday peak. Claims are expected to average 461k in May, after averages of 582k in April, 724k in March, and 800k in February. The 444k May BLS survey week reading follows prior survey week figures of 566k in April, 765k in March, and 847k in February. We assume a 700k May payroll rise after the surprisingly lean 266k April gain.

Continuing claims rose by 111k to 3,754k in the week of May 8, following a downwardly revised 3,640k figure. We expect continuing claims to fall -94k to the 3,660k area for the week ending May 15. The downtrend in the continuing claims data has moderated over the past six weeks, just as the drop in initial claims has picked up steam. We expect a continuing claims rise of 7k between the April and May BLS survey weeks. We saw prior drops of -188k in April, -628k in March, -409k in February, -555k in January, and -705k in December.

Advance Indicators Goods Deficit: -$93.6 bln

We expect the advance indicators report to reveal an April widening in the goods trade balance to a new all-time wide deficit of -$93.6 bln from a current all-time large gap of -$90.6 bln in March. We expect exports to grow 1.6% to $144.7 bln, while imports grow 2.2% to $238.3 bln. The oil price uptrend stalled in April, hence providing some restraint for gains in petroleum sector trade, while trade in vehicles should continue to rebound after the February pull-back, despite ongoing parts shortages. We expect a -$28 bln bilateral goods balance between the U.S. and China with elevated import and export figures as businesses rebuild inventories. We saw a -$43.1 bln all-time wide bilateral gap in October of 2018. The advance report should also reveal an April gain of 1.3% for wholesale inventories and -0.8% auto-led drop for retail inventories.

Personal Income/Consumption: -14.0%/0.9%

We expect a -14.0% personal income pull-back after the 21.1% March surge, with a 1.2% April rise in compensation after a 1.0% March gain. The wage gain reflects a 0.5% April climb for hours-worked and a hefty 0.7% rise for hourly earnings. We expect a -42.4% April drop in “current transfer receipts” after a 95.1% March surge, as this measure tracks stimulus spending. We expect a 0.9% rise in consumption after a 4.2% March jump. We expect a savings rate drop to 13.0% in April from a 27.6% peak in March, versus a 12.5% recent-low in November. We saw prior peaks of 20.0% in January and 33.7% in April of 2020. We peg disposable income growth at -27.8% in Q2, after a 67.0% surge in Q1, and contraction rates of -8.8% in Q4 and -14.4% in Q3. We expect a growth rate for real consumption of 11.0% in Q2, after growth rates of an estimated 11.3% (was 10.7%) in Q1, 2.3% in Q4, and 41.0% in Q3.

Michigan Sentiment, Revised: 82.8

We expect the final May Michigan sentiment report to repeat the preliminary reading of 82.8, which reflects a -5.5 point drop from cycle-highs of 88.3 in April and 84.9 in March, versus a 6-month low of 76.8 in February. We saw current conditions drop to 90.8 from cycle-highs of 97.2 in April and 93.0 in March, versus a 4-month low of 86.2 in February. Expectations fell to 77.6 from cycle-highs of 82.7 in April and 79.7 in March, versus a 3-month low of 70.7 in February. The 1-year inflation gauge surged to a 13-year high of 4.6% that matched highs in April and March of 2011, after a 9-year high of 3.4% in April. The 5-10 year inflation measure jumped to a 10-year high of 3.1% from 2.7% in April and a 7-year high of 2.8% in March that was last seen in July of 2015. The steep confidence climb with vaccine distributions, stimulus deposits, and the easing of coronavirus restrictions may have peaked, given May pullbacks in Michigan sentiment and the IBD/TIPP index, though the weekly Langer index continues to rise.

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