Inflation and The Fed

Technical Analysis

Friday, the S&P 500 closed at a price of 4,247. That gives us a new resistance level of 4,270 and a new support level of 4,220. We talk about the 50-day moving average along with the 100-day moving average, but now that we are approaching mid-year, we wanted to go over the year-to-date moving average. The year-to-date moving average is currently at a price of 4,001. Over the last few weeks, we have talked about the market creating a base or ceiling. These are numbers that we will continue to watch for, in relation to the base or ceiling of the market, as well as topics regarding the consumer.


On June 1st, 1982, the S&P 500 was priced at around 109. We wanted to point that out so that you would think about all the historical events that have occurred between 1982 and today as we recover from the COVID pandemic. Here we are in 2021, and the S&P 500 is now over 4,000, continuing to move and show strength. Greg Powell did an interview with Fred Katayama of Reuters TV on Friday, and during that interview, he said, “This isn’t a recovery. This is a reset.” You can watch the interview to hear more by clicking this link: Interview with Greg Powell and Fred Katayama of Reuters

The Cause of Inflation

There has been a lot of talk on Wall Street recently about inflation and whether or not higher costs are temporary or not. This Wednesday, we will get an update from the Fed to see what their latest thinking is. Last Thursday, the Consumer Price Index showed that the cost of living surged in May and drove inflation to a 13 year high. However, the good news is, so far, the bond market and the stock market are siding with the Fed’s thought, that this inflation spike is temporary. But we are seeing inflationary pressures from two sides. The cost of materials is going up and at the same time, demand is rising. Typically, we have one or the other and right now we are seeing both occur at the same time. This is creating the perfect storm for inflation to rise. One thing that we are watching carefully when it comes to inflation, is the widespread microchip shortage. You might have seen it in the news recently. This shortage is making it harder to automate supply chains and keep operations moving smoothly. We are especially seeing the microchip shortage cause havoc in the car market. In the video, we show a chart that shows that there have been record prices for used cars and trucks, which was a big contributor to inflation last month. Used car prices surged to 7.3% in May followed by a 10% gain in April. One of the big reasons for this is the microchip shortage is causing a big slowdown in new car production. The Fed committee, who sets interest rates, will hopefully give the market some clarity on the current trajectory of inflation and then higher cost on Wednesday. Any change to their current thoughts on the transitory nature of this inflation could have an impact on the market. At this point in time, we think that inflation is more of a temporary thing, but we are watching things carefully. The reports that are coming out can be scary if you do not know all the details around them.

Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here

Adam Vansant, AIF®
Associate Vice President
Wealth Consultant
Email Adam Vansant here


Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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