5-Chart Friday (7/16/21)

By Charlie Bilello

16 Jul 2021

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5 charts from the past week that tell an interesting story in markets and investing…

1) 5% Inflation

Inflation in the US continues to march higher, hitting 5% overall for the first time since 2008. Core CPI (which excludes food/energy) rose to 4.5%, its highest level since 1991.

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Leading the move higher were price increases in used cars/trucks and gasoline, both up over 45% in the last year.

Source: BLS

Gas prices rose to $3.23 per gallon this week, their highest level since 2014.

The combination of higher inflation and the Fed maintaining 0% policy has pushed the real Fed Funds Rate down to -5.4%, the lowest real central bank rate in the world.

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2) Lower Lumber

While inflation remains elevated in most areas, Lumber prices have collapsed as supply (sawmills ramping up production) is finally meeting the higher demand from the building/remodeling boom.

Lumber futures are more than two-thirds lower than their high in May, at their lowest levels since last November. This should spur builders and homeowners resume projects that were put on hold after the parabolic advance earlier in the year.

3) Smaller Caps

Small caps ($IWM) are showing continued signs of weakness, giving back all of their relative gains on the year. They had been standout performers from last October through early March in a vertical rally that was unprecedented in the space. The bullish narrative that small companies based in the US would disproportionately benefit from the stimulus programs appears to be wearing off.

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The Russell 2000 small cap ETF is now up 11.3% on the year versus a gain of 16.8% for the large cap S&P 500 ($SPY).

4) More Volatility in Memes

The wild swings in meme stocks continue with GameStop ($GME) in the midst of its third major correction since its parabolic move higher in January.

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5) The Moderna Miracle

Moderna’s ($MRNA) market cap surged above $100 billion this week, surpassing Zoom ($ZM) in the process. Its current market value of $112 billion is 17x higher than where it stood at the start of 2020 ($6.5 billion).

Investors are expecting huge numbers this year ($19 billion in revenue vs. $800 million in 2020) and a continued need for its revolutionary mRNA technology in the future. The stock will be added to the S&P 500 Index on July 21.

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And that’s it for this week. Thanks for reading.

Have a great weekend everyone!


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