Inflation and Your Pocketbook

Consumer Update

Last week, we talked about how we were looking forward to a lot of information on the consumer coming out. This week, we wanted to address the findings of what we were anticipating coming out. The month-over-month retail sales number was a big number we were looking for. Expectations were for it to be up 6% month-over-month. A lot of the reason why the expectations were so high was because of the extra stimulus check that most consumers received. The numbers came in much better than expected showing a 9.8% month-over-month increase in retail sales. That is important because, over the last year, we have seen a lot of the stimulus checks come to the consumer, but we have not seen them really spend it. We have seen the savings rate spike up instead. It is good to see that the recent checks were not only received, but also spent and put back into the economy. The consumer still has over a trillion dollars in excess savings on hand, but it is good to see the consumer coming back and spending money again, regardless. The 9.8% reported number blew past expectations, so the next question is, with all this money floating out there, will that increase inflation? The Consumer Price Index came in higher than expected but was still muted overall. The year-over-year CPI was up 2.6%. While that is high, relative to recent years, that is still not what we would call runaway inflation. It is only 0.6% ahead of where the Fed’s goal of 2% is. We are only seeing inflation in specific areas. We hear a lot of people talking about the price of housing going up, and some of that is driven by the huge price increase of lumber. You will see the recent price per thousand board foot is at $1,036. That is nearly three times what it was in 2019. Looking at the chart shown in the video, you will see that that is not a long-term trend. That is a clear spike based on short-term supply, demand bouts. We would expect that to be what is called, in economic terms, transitory. That means that it is not permanent inflation. It is here for today, but likely will be gone down the road and we will probably see prices normalize and go back down to one-third of where they are now as the supply and demand works itself out. There has been a lot of short-term, good news reported lately that we want to see continue. We are about to hit earnings season and we have been talking about the market going higher. What will support those higher prices? Will corporate earnings? Consumer spending has an impact on corporate sales and that revenue income impacts the market. We are hoping to see positive sales numbers start to come out of companies. Earnings season is about to kick-off and after we already got what looks like good consumer numbers, we believe the second and third quarters could show a continuation of this consumer spending and positivity. It is important to remember that when we are looking at these numbers, a lot of them are year-over-year comparisons. We are going to see consumer spending and earnings for the second and third quarters, but that’ll be compared to the second and third quarters of last year. Which we all remember to be very dark and weak, economically. Numbers really should be strong for the next two to three quarters.

Technical Analysis

Friday, the S&P 500 closed at 4,185. That puts us at a new resistance level of 4,225 and a new support level of 4,145. Typically, we talk about the 50-day and 100-day moving averages but today, we wanted to go over the longer term, 200-day moving average, which has now crossed over the price range of 3,600. This is important since this average is including a COVID environment. It’s also important because 94% of stocks are trading above their 200-day moving average. Are we going to continue to see the bulls push forward or are we going to see the bears start to crawl their way back? Earnings season is coming up for the second and third quarter, so it’s going to be very important to keep an eye on that 200-day moving average, as well as the consumer and their spending trends.


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

Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth 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.

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