Tag: Market Viewpoints

Market Viewpoints – Winter 2023

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager

Inflation continued to show some signs of moderating during the fourth quarter of 2022 with the headline CPI reading falling to 6.5% in December after hitting a high of 9.1% in June.  The Federal Reserve dramatically raised the Fed Funds Rate throughout the year from a starting range of 0%-0.25% all the way up to a range of 4.25%-4.50% to end the year.  Expectations are that the Fed will continue to hike rates a few more times in 2023, but the hikes will be less sizeable, in the range of 0.25% or 0.50% each.  

The consensus is showing a peak Fed Funds rate of between 5.00-5.25% this year, but that could change depending on how quickly inflation moves downward, or if there are signs that inflation starts to increase in certain parts of the economy.  Both stock and bond markets had rough years in 2022 with the S&P 500 falling over 18% and the US Aggregate Bond index falling over 13%, resulting in the bond market’s worst year on record.

The stock and bond markets have both started 2023 with nice rebounds, however we expect volatility to remain elevated throughout at least the first half of the year.  Markets continue to monitor Fed policy and inflation closely, looking for signs of when the Federal Reserve will pause their interest rate hiking cycle.  

The markets have been on edge worrying that the Federal Reserve will be too aggressive and cause a larger than expected slowdown which could lead to a recession. The Federal Reserve still has a chance at a soft-landing where they slow the economy enough to significantly 

bring down inflation, but not enough to cause a recession.  However, the Fed’s history during significant rate hike cycles has shown they are not good at threading the needle for a soft-landing, and historically the Fed tends to over-tighten causing a recession. 

Expectations are that if the U.S. economy does rollover into a recession by the end of 2023, that it would be mild since unemployment remains low and consumer spending has remained resilient even in the face of rising prices due to high inflation.  The inflation data will be important to monitor as the year progresses since this will have a huge impact on Fed policy going forward.  

The economy should continue to slow this year as Fed policy tightening works with a lag.  Both consumer spending and a low unemployment rate have helped the economy avoid a significant downturn so far, but it will become more difficult this year especially if the Fed decides to raise rates more than their current projections.  

Company earnings remained resilient in 2022, as businesses were able to pass on their higher costs to consumers, but could come under pressure in 2023 if consumers pull back on spending and the economy continues to slow.  It is important to remember the economy and stock market do not operate on the same schedules.  The stock market usually bottoms well before the economy so while economic conditions may continue to slow for the near future, we will look for clues that inflation has peaked and begins to subside indicating the Fed is winning the battle. The Fed continued its aggressive rhetoric each time the market tried to rally last year, so markets will be watching for the Fed to tilt to a more accommodative posture, which will take pressure off the market and could lead to a sustainable rebound.

 We continue to be mindful of the risks that the market faces going forward from a more aggressive Federal Reserve possibly overtightening, sticky areas of inflation remaining elevated, company earnings coming under pressure, and continued geo-political risks. 

We recommend staying the course with your investment objectives with the understanding that markets go through cycles and both the stock and bond markets will eventually find their footing. 

We recommend communicating with us if any short-term cash needs arise so we can look for opportunities to be proactive when raising cash for any necessary distributions, helping to protect against possible short-term negative moves in the market.

Market Viewpoints – Fall 2022

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager

All eyes remain on the Federal Reserve this year as the Fed’s fight with inflation continues to have a large effect on financial markets.  Global stock and bond markets continue to struggle this year as the Fed front-loaded rate hikes in an aggressive manner by increasing the Fed Funds rate by 0.75% in each of their last three meetings.  The Fed Funds rate is now between 3.00-3.25% with projections that they could increase to 4.50% or above by the end of the year.  The stock market has attempted to rally a few times in anticipation that the Fed may be getting closer to the end of their rate hike cycle.  However, the Federal Reserve has quickly come out with more aggressive policy rhetoric, which caused these rallies to reverse.

The Federal Reserve continues to highlight their desire for a more restrictive policy stance until they have seen a meaningful and sustainable reduction in inflation.  It seems as if the Fed is attempting to keep markets down until they feel they have inflation under control, for fear that a rebound in markets would increase consumer spending and go against their ability to reduce inflation.  The Fed does not have control over the supply side of the economy so in order to bring down inflation; they are trying to reduce demand by making borrowing more expensive and tightening financial conditions.  The Fed’s tools for fighting inflation have been described as blunt force instruments that cause many disruptions in markets.

                The cost of borrowing has increased dramatically this year with 30-year mortgage rates approaching 7% after starting the year slightly above 3%.  The same is true for business loans, auto loans, and credit card interest rates.  As the Fed increases the Fed Funds rate, these increases trickle through the lending system causing higher borrowing costs.  The Fed’s goal is to try to motivate businesses and consumers to reduce spending in order for demand to come down.  The Fed would also like to see less job openings and more job seekers in order to bring the labor market into balance.  The Fed does not want to see wage pressures continue to build since this also goes against their goal of reducing inflation back to more normal levels.  As wage pressures build, companies increase prices to offset these additional costs, which adds to inflation.

                The U.S. economy contracted in both the first and second quarter this year, and is projected to show only slightly positive gains for the remainder of the year.  So far, US company earnings have remained fairly strong as companies pass on higher costs to consumers.  The job market continues to remain hot and unemployment figures are low which is helping to keep the economy from tipping into a recession as consumer spending remains robust.  The Federal Reserve is in a difficult position as they try to slow the economy to reduce inflation, without tightening conditions too much to cause a recession.  The probability remains elevated for a potential recession by the end of 2024, however many deciding factors will be in play going forward. 

The stock market usually bottoms well before the economy so while economic conditions may continue to slow for the near future, we will look for clues that inflation has peaked and begins to subside indicating the Fed is winning its battle.  We are mindful of the risks that the market faces going forward from a more aggressive Federal Reserve, elevated inflation, continued supply chain issues, and ongoing geo-political risks.  We recommend staying the course with your investment objectives with the understanding that markets go through cycles and both the stock and bond market will eventually find their footing.  It is important to communicate with us if any short-term cash needs arise so we can look for opportunities to be proactive when raising cash for those distributions, helping to protect against possible short-term negative moves in the market.

Market Viewpoints – Summer 2022

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager
Both the stock and bond markets continued their struggles in the second quarter this year following a rough first quarter. The S&P 500 closed down 20.6% in the first half of the year with the worst start since 1970. The NASDAQ lost 29.5% for its worst start ever, and the bond market fell 10.35% for its worst start since 1980.

Inflation continues to dominate the list of market worries as the Federal Reserve takes steps to increase the Fed funds rate and tighten monetary conditions in order to try to keep inflation from becoming entrenched. Supply chain shortages and the Russian invasion of Ukraine continue to push up the cost of energy and goods, which is working against the Fed’s efforts to combat inflation.

With inflation remaining at elevated levels, the Fed has indicated that they intend to front-load their rate hikes, meaning there will be larger rate increases early on in the process. The Fed indicated early in the year that they would hike rates in a more slow and steady manner, but they have had to make adjustments based on how difficult the economic conditions have become to try to reduce inflation.

The Fed chose to raise the Fed funds rate by 0.75% in their June meeting and indicated they may hike between 0.50%-0.75% again in their July meeting. By front-loading their rate hikes, the Fed is aiming to restrict financial conditions faster in hopes of having a larger tightening effect on financial conditions to bring down inflation.
 
Faster rate hikes have also caused the stock and bond markets to react negatively due to the fear that a more aggressive Federal Reserve rate hike cycle has a higher probability of becoming overly restrictive causing an economic slowdown, which also increases the probability of a recession.

GDP growth turned negative in the first quarter of 2022, in large part due to an increase in imports and a decrease in exports, causing a record U.S. trade deficit, however many of the other GDP indicators remained strong. GDP growth has been trending lower in the second quarter of 2022 as well, indicating that the Fed rate hikes are beginning to have a slowing effect on GDP growth.

The Fed has a difficult job ahead in trying to slow consumer demand by tightening financial conditions enough to reduce inflation while trying not to tighten too much that demand contracts too far causing a recession.

The Fed stated that they remain committed to tackling inflation so it does not become entrenched. The second half of the year should provide a lot more clarity on Fed policy to see if front-loading rate hikes works to slow inflation without becoming overly restrictive to economic growth.

The stock market is looking for clues that inflation has peaked and will come down to less elevated levels before putting in a bottom. The stock market usually bottoms well before the economy, so while economic conditions may continue to slow for the remainder of the year, we will look for clues that inflation has peaked and begins to subside for the possibility of a turnaround in the stock market.
We continue to be mindful of the risks that the market faces this year from a more aggressive Federal Reserve, elevated inflation, continued supply chain issues, and continued geo-political risks. We recommend staying the course with your investment objectives with the understanding that markets go through cycles and both the stock and bond market will eventually find their footing.

It is important to focus on the longer-term goals and objectives with an understanding that severe pullbacks will come and go as part of a normal market investment cycle. We also recommend communicating with us if any short-term cash needs arise so we can look for opportunities to be proactive when raising cash for any necessary distributions, helping to protect against possible short-term negative moves in the market.

Market Viewpoints – Spring 2022

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager
Both stocks and bonds struggled in the first quarter this year due to a more aggressive Fed posture, inflation risks continuing to increase, and the Russian invasion of Ukraine.

The US stock market experienced its first correction in almost two years as the Fed has steadily been increasing their rate hike expectations and discussing reducing their balance sheet as the year has progressed to try to slow down inflation, while the geopolitical risks from the war in Ukraine have only added further upside inflation risks.

The stock market began to improve throughout March, but still finished the quarter in negative territory. The bond market struggled in the first quarter with rate hike expectations increasing in a meaningful way with the Fed’s dot plot showing the potential for nine rate hikes this year.

At the beginning of the year, only three Fed rate hikes were projected by the Fed. This more aggressive Fed posturing has the market on high alert for a possible Fed policy mistake in the future if they were to overtighten causing a considerable slowdown in the economy.

Inflation continues to be the largest risk to the economy this year with a large supply and demand imbalance in many areas of the economy. The supply chain began to improve slightly early in the year prior to the Russian invasion of Ukraine. However, commodity prices including oil, natural gas, wheat and other commodities have increased due to the impact on supplies produced from both Russia and Ukraine further adding to the supply chain imbalances and adding upside pressure to energy costs throughout the globe, especially in Europe due to their large reliance on Russian oil and natural gas.

The Fed has taken a more aggressive posture to raise interest rates faster and begin to reduce their balance sheet this year, in an effort to slow the economy and stop inflation from becoming entrenched. It is too early to tell if the Fed will be successful in the efforts to slow inflation without causing too much of a meaningful slowdown in the economy.

The US is more insulated than Europe in terms of energy production so the US economy should be less impacted by inflated oil and gas prices. US GDP is projected to remain above trend this year; however, expectations have come down somewhat from the beginning of the year as inflation pressures begin to weigh on earnings expectations and consumer spending.

US companies have continued to show resilience in being able to pass along their increased input costs on to the consumer so earnings have continued to remain strong.

We will continue to monitor consumer spending throughout the year to determine if price increases begin to have a meaningful impact, which in turn will weigh on company earnings, especially companies that operate in the consumer discretionary sector.
US consumers have continued to show resilience in spending behavior in the face of higher costs, however the more entrenched inflation becomes, the higher the probability that consumer behaviors will eventually shift to a more cautious approach. The Fed has a difficult job ahead to try to rein in inflation, but not overtighten economic conditions to cause the economy to slow down too much.

While many positives remain for the global economy with global economic growth and company earnings expected to continue to remain positive in 2022, we maintain our view to be mindful of the risks that the markets face this year from a more aggressive Federal Reserve, elevated inflation, continued supply chain issues, and many different geo-political risks.

We recommend staying the course with your investment objectives, and we continue to rebalance and take profits as we see opportunities to protect portfolio gains and keep our portfolios in line with their investment objectives.

We also recommend communicating with us if any short-term cash needs arise so we can look for opportunities to be proactive when raising cash for any necessary distributions helping to protect against possible short-term negative moves in the market.

We recommend maintaining a more long-term focus on investment goals and objectives with an understanding that short-term headline risks rarely have a long-term effect on markets.

Market Viewpoints – Winter 2022

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager
The stock market finished 2021 on a high note, with a strong rally into year-end capping another positive year for stocks overall. U.S. stocks continued their outperformance versus both Developed International stocks and Emerging Market stocks. However, the bond market struggled last year posting a negative 1.54% annual return for the Barclays U.S. Aggregate Bond Index with the market anticipating a less accommodative Federal Reserve policy along with future rate hikes. Heading into the New Year, the economy remains on strong footing with both consumer spending, corporate profit margins, and company earnings continuing to provide support to the economy. Inflation and a more aggressive Fed policy continue to remain risks to the economic recovery, so we will be watching closely to see how both the stock and bond markets handle the Fed beginning to wind down their monthly bond purchases and begin to posture for increasing the Federal Funds Rate.
 
The Federal Reserve decided in November to begin to taper their bond asset purchases on a monthly basis, initially projecting to end those purchases early summer. In December, the Fed agreed to speed up the reduction in bond purchases to complete the reduction in March this year. This gives the Fed the ability to begin to increase the Fed Funds Rate earlier should they decide a rate hike is warranted as early as March. The Fed also indicated that they might begin to reduce their bond holdings faster than the market expected which caused both the stock and bond market to reprice assets given the possibility of a more aggressive move from the Federal Reserve. It is too soon to determine if the Fed will follow through on the more aggressive policy this year, but the market is currently pricing in three rate hikes in 2022, three more hikes in 2023, and two more hikes in 2024. The Fed continues to say they will remain flexible depending on how inflation and employment readings progress throughout the year.
 
Inflation continued to surge in the 4th quarter of 2021, leading the Fed to remove the word “transitory” from their Fed statement indicating that they feel some inflationary pressures are going to take longer to return to normal than they previously projected. Global supply chains have shown some signs of improvement with some of the port backlogs improving and some of the largest companies continuing to maneuver well to keep their shelves stocked. However, inflation expectations remain elevated for 2022. Expectations are for inflation to begin to subside as the year progresses, but still ending above the Fed’s 2% goal. Should inflation hold at higher levels than predicted, it could cause the Fed to be more aggressive than current expectations. This would generally be a headwind for markets, especially growth stocks since they tend to perform best in a low interest rate environment. We highlight this as a risk case to watch as the year progresses. 2022 will be a year in which both consumer and corporate spending will need to remain strong in order to offset a reduction in government stimulus spending and a less accommodative Federal Reserve.
 
Chinese stocks continued their struggles last quarter with the Chinese government expanding their regulatory crackdown on industries they feel are not adding to “common prosperity”. This has forced many of China’s largest technology companies to start to deleverage some of their assets and make donations to the government, which have weighed heavily on the Chinese stock market overall posting negative returns for the year. China remains a large driver of global growth so we will be paying close attention to their moves in 2022 to see if they pivot to a more accommodative policy to restore growth.
 
While many positives remain for the global economy with global economic growth and company earnings expected to continue to show strong growth in 2022, we maintain our view to be mindful of the risks that the markets face this year from a less accommodative Federal Reserve, elevated inflation, a very contagious Omicron Covid-19 variant, and many different geo-political risks. We recommend staying the course with your investment objectives, and we continue to rebalance and take profits as we see opportunities to protect portfolio gains and keep our portfolios in line with their investment objectives. We also recommend communicating with us if any short-term cash needs arise so we can look for opportunities to be proactive when raising cash for any necessary distributions helping to protect against possible short-term negative moves in the market. We recommend maintaining a more long-term focus on investment goals and objectives with an understanding that short-term headline risks rarely have a long-term effect on markets.

In the Community – River Music Experience

Our Non-Profit Community Spotlight

River Music Experience

By Tyson Danner, Executive Director

River Music Experience Logo

Since its founding in 2004 as part of downtown Davenport’s revitalization, the River Music Experience has served as a leader in the Quad Cities’ musical landscape. As it progressed through its early years, it found its place serving community needs by providing inclusive educational programming and high-quality, accessible concerts by local and regional talent.

Now in its eighteenth year, the River Music Experience has a greater impact on our region than ever before, partnering with music venues, city governments, and other nonprofits to create unique, diverse concerts throughout the Quad Cities. RME educational programs have prioritized accessibility with programs like the Acoustic Music Club for youth and adults with special needs. RME is investing in the next generation through mentorship with programs like InTune, a music mentoring program held within community centers. The organization’s staple educational program, RiverCurrents, continues to bring the musical traditions of the Mississippi River to elementary students across the region.

The Echo is RME’s newest endeavor – an online music publication that highlights all the great music happening in our local scene. It is the latest in RME’s growing dedication to building our regional music scene and bridging the gap between artists and potential audiences. Articles, resources, and a full music calendar are available at TheEchoQC.com.

With recent financial stability and program growth, the organization was prepared to invest for the first time. The staff at Northwest Bank’s Investment Management Group was incredibly helpful in guiding us through that process, providing encouragement, guidance, and vast experience to help us meet our goals. We are thankful for our partnership with Northwest Bank, and couldn’t be happier to work with a bank that places such high value on supporting its community.

Upcoming Events from our Nonprofit Partners

Winter Wheels: Antique Motorcycle Exhibition | Open through April 3 | Putnam Museum & Science Center
This community-curated exhibit features vintage, classic, and antique motorcycles of all makes and models.

Framed: Step into Art | Open January 22 – May 1 | Family Museum
Step inside the framework of famous paintings and experience art with your kids and family in this interactive exhibition.

Easter Egg Scramble | April 16 | Handicapped Development Center
5K walk/run located in the Village of East Davenport, supporting HDC. Contact maryegger@hdcmail.org for details.

Spring Parent Learning Series | Beginning May 4 | The Arc of the Quad Cities
The Arc of the QC is hosting a series of workshops focused on providing the tools parents of children with intellectual and developmental disabilities need to be the most effective. All sessions are free.
Visit www.arcqca.org for information.

2022 Mental Health for Healthy Living Conference | May 6 | Vera French
Vera French is hosting a conference on mental health featuring Chris McCormick-Pries, ARNP and John Medina, PHD. To register, go to forms.office.com/r/2grWjJdQwC.

Market Viewpoints – Fall 2021

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager

After a strong start to the quarter, stocks pulled back from their recent highs in September. The US economy remains on solid footing, however there are several topics that are concerning markets. The first has to do with the US debt ceiling and both parties being far away from any compromise to allow the debt ceiling to increase risking a potential US default on its debt obligations. The infrastructure bill discussions continue to drag on without any breakthrough on the total size of the package. Inflation also continues to worry the market while supply disruptions continue to increase with container ships and rail backups along with energy prices continuing to rise. Last, but not least, China has continued its crackdown on many different areas in its economy such as real estate, online education, online gaming, and technology. China has also tried to reduce its energy consumption, especially coal, which is causing energy shortages and adding further strain on already frail global supply chains.

The debt ceiling debate is intensifying with US Treasury Secretary, Janet Yellen, warning that the US would be unable to pay its bills without the debt ceiling raised by October 18th. The issue is becoming very political and the potential risk of a US debt downgrade is looming large over markets. Hopes are that an agreement can be reached soon to avoid unnecessary stress on financial markets. Infrastructure discussions continue without any new breakthroughs to end the quarter. Congress was trying to pass two separate bills, but progressives continue to try to force the bills to be linked together. Progressive and moderate Democrats remain divided on the overall price tag of the bills. Expectations are that a compromise will be reached sometime during the month of October.

Inflation concerns continue to be an issue with the Fed’s stance that inflation will be transitory starting to come under question. Global supply chains continue to be fractured for a variety of reasons such as not enough workers, bottlenecks, Covid shutdowns, and lack of excess inventory. These factors are proving to take longer to unwind then the Fed had initially projected and shipping costs continue to increase. Interest rates have also started to rise from their extremely low levels with the Fed indicating they will begin tapering (reducing) their monthly bond purchases by the end of the year. Tapering does not mean tightening, though, so the Fed will remain very accommodative well into 2022. We will be watching for any indication from the Fed of when the first rate hikes will begin with expectations currently split between the first hikes happening at the end of 2022 or early 2023 according to the Fed’s most recent dot plot.

The Chinese government is also making headlines for their strong regulatory crackdown on many areas of their economy such as online gaming, private education, real estate, and the large technology companies. This has increased the risk for publicly traded stocks in China due to the growing risk of further government intervention. China is also dealing with trying to reduce energy consumption and carbon emissions, which is further slowing their manufacturing and adding to supply chain issues.

The fourth quarter is usually a strong period for stocks; however, we maintain our view to be mindful of the risks facing the market for the remainder of the year. We continue to recommend staying the course with your investment objective, and we will rebalance as year-end approaches to bring portfolios in line with our recommended allocations. We also recommend determining any short-term cash needs that you may have over the next six months as we continue to maintain appropriate cash levels for clients needing distributions. Creating this cash can help protect against an increase in volatility and short-term moves in the market. We recommend maintaining a more long-term focus on investment goals and objectives with an understanding that short-term headline risks rarely have a long-term effect on markets.

In the Community – Fall 2021

Our Non-Profit Community Spotlight

Giving in the Best Way Possible

The Quad Cities Community Foundation

Quad Cities Community Foundation Logo

The Quad Cities Community Foundation is the place where you and your trusted advisor go to fulfill your charitable giving in the most effective way possible. With a 57-year history in the Quad Cities region and a staff of gift planning, investment, and grantmaking professionals, the Community Foundation’s deep knowledge of community needs and opportunities allows it to connect you with the organizations and causes you care about. 

When you trust the Community Foundation with your generosity, you gain access to a range of tailored philanthropic services designed to help you meet your own goals for today and for the future. Whether you want to gift to an existing fund or establish one of your own, the Community Foundation makes the process easy and rewarding. Its team of experts is here to assist you with philanthropic guidance, legacy giving, gift and estate planning, family philanthropy, individualized grantmaking support, scholarships, donor-advised funds, and more.

And by partnering with the financial expertise at Northwest Bank & Trust’s Investment Management Group, the Community Foundation stewards your charitable investment for today’s needs and tomorrow’s opportunities in the Quad Cities and beyond.

To learn how the Community Foundation can help you give to support the community and causes you care most about, contact Anne Calder, vice president of development, at AnneCalder@qccommunityfoundation.org or (563) 326-2840.

Upcoming Events from our Nonprofit Partners

Ridgecrest Foundation Annual Dinner | Friday, November 5, 2021 at 5:30 p.m. | The Outing Club
Ridgecrest Foundation
Join Ridgecrest Village for their annual dinner at the Outing Club, where there will be a cocktail hour starting at 5:30, followed by a presentation and entertainment. All proceeds benefit the Koning Fund, which helps assist residents living at Ridgecrest who qualify and need assistance with their maintenance fees. Contact Carrie for more information and tickets at cdreifurst@ridgecrestvillage.org or 563-288-3431.

Scott Community College Glass HeartsGlass Hearts Fundraiser | Sale ends November 11, 2021
Scott Community College Foundation
Help support the Veteran students at Scott Community College by purchasing an exclusive red, white, & blue hand crafted glass heart made by Hot Glass this year only. Hearts can be picked up or shipped to your home.

Wild Kratts ExhibitWild Kratts®: Creature Power Exhibit | Open now through January 8, 2022
Family Museum
Get ready for an extraordinary adventure! Step into the world of Wild Kratts® to explore the secret lives of amazing creatures in this hands-on exhibit. Immerse yourself in animal habitats from around the globe, discover incredible creature powers and go on a mission to foil the villains’ nefarious plans.

HDC Nut Sale

 

 

28th Annual Boosters Organization/Bob Ott Memorial Nut and Candy Sale | Order Now!
Handicapped Development Center
Ordering is now open for HDC’s Annual Nut & Candy Sale! Visit their website at https://handicappeddevelopment.org/nut-candy-sale/ for a list of items and printable order form, or email Mary Egger at maryegger@hdcmail.org to place your order.

#GivingTuesday | Tuesday, November 30, 2021
Ridgecrest Foundation
#GivingTuesday is a global generosity movement unleashing the power of radical generosity. To participate, visit www.ridgecrestvillage.org and include #GivingTuesday when you donate! The funds raised from this event will go to the Life Enrichment fund.

Market Viewpoints – Summer 2021

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager

U.S. stocks continued to show strong gains this year with the S&P touching new highs at the end of June on strong company earnings and increased consumer spending. Bond yields have also come down in the second quarter after the large increase to start the year. This helped bonds reduce the losses they suffered during the first quarter on rising yields and inflation fears. Inflation fears have been dominating headlines and worrying investors due to the large increases in demand in multiple parts of the economy leading to higher than expected inflation readings. Supply issues have continued to constrain companies from getting back to full capacity due to a lack of workers, supply chain issues, and pricing pressures. The economic recovery remains intact with GDP continuing to show a very robust rebound from the COVID induced shutdown last year. The U.S. is on track to post the strongest GDP figures in decades this year as long as the recovery continues as expected in the second half of the year. COVID-19 infections have come down meaningfully in the U.S.; however, the new Delta variant is of particular concern for its highly infectious characteristics especially for the pockets of the U.S. with the lowest vaccinations rates. This will be something important to track as the year progresses.

Consumer demand has been robust this year after last year’s lockdown measures with many consumers eager to resume spending on dining out, travel, home and auto purchases, and many other retail sectors as the economy reopens. This put a lot of pressure on companies to increase capacity quickly, but many were caught flat-footed and were unable to ramp-up production, obtain the supplies they needed, or hire back enough workers to meet the robust demand. These constraints have caused spikes in inflation along with surging prices in many different areas of the economy. However, there are signs that supply can catch-up with demand eventually noting that the prices of lumber came down over 40% in June as production increased after an extraordinary run-up in lumber prices over the last year. The Fed still views inflation as transitory expecting that the recent sharp increases should eventually subside and average inflation coming back down to more acceptable levels into 2022. We will monitor this area closely in the months ahead as new inflation indicators become available.

Congress is continuing discussion on trying to get a new infrastructure package approved. The Biden administration along with a bipartisan group of senators agreed to a $1.2 trillion infrastructure bill, The Bipartisan Infrastructure Framework, made up of almost $600 billion of new spending and the rest from dollars earmarked for previous unused coronavirus relief funds. The package proposal aims to spend the funds on infrastructure projects over a period of eight years; however, it faces a tough path forward to win approval from Congress. The proposal includes billions of additional spending to improve our nation’s infrastructure with a focus on traditional infrastructure projects benefitting roads, bridges and rail, water systems, and broadband internet access.

We maintain our view to be mindful of risks facing the market in 2021 as COVID-19 cases are on the rise again, and stocks and bonds still trade expensive compared to their historical averages. However, central banks and governments continue to provide massive amounts of stimulus that are driving up asset prices. We continue to recommend staying the course with your investment objective and to rebalance your portfolio by selling strengths and buying into weaknesses to adjust to movements in the market over time. We also recommend determining any short-term cash needs that you may need over the next six months. Creating this cash can help protect against an increase in volatility and short-term moves in the market. We recommend maintaining a more long-term focus on investment goals and objectives, and not reacting to short term up or down movements in the market.

In the Community – Summer 2021

Our Non-Profit Community Spotlight

The Putnam Museum World Culture Gallery

By Rachael Mullens, President/CEO

The Putnam MuseumThe Putnam Museum and Science Center recently unveiled its new World Culture Gallery showcasing cultures from around the world as reflected in the museum’s historic collection. As a Smithsonian Institution Affiliate, the Putnam houses a collection entrusted to the museum by seven generations of Quad Citians, including objects from the world travels of some of the museum’s founders including the Putnam, Palmer, and Figge families.

The World Culture Gallery’s inaugural exhibit, The Colors of Culture, explores the meaning of color to people of different cultures, including the symbolism of color in adornment, home, and celebration. Raising awareness of the rich cultural diversity found right here in our own community, the exhibit is a partnership with World Relief Quad Cities and includes artifacts loaned by families from the organization’s refugee resettlement program.

The World Culture Gallery is the first of its scale since the opening of the Science Center in 2014 and was made possible by support from Bechtel Trusts, Scott County Regional Authority, the Putnam Museum Guild and numerous private donors and Trustees. Longstanding and generous support of community partners including Northwest Bank & Trust Company are how the Putnam has been able to serve the community for over 150 years.

A museum of history, culture, and science, the Putnam has served the Quad Cities region since 1867 and is the Quad Cities’ only Smithsonian Affiliate. The Putnam brings to life a sense of place, time and purpose to ignite human potential and inspire our diverse community to learn about and care for our world and all its people.


Visit putnam.org and click “Join and Support” to learn about ways you can get involved.

Upcoming Events from our Nonprofit Partners

the catalyst awards

The Catalyst Awards & Auction | July 30, 2021 | Schweibert Park, Rock Island, IL
The Arc of the Quad Cities Area
Join the Arc of the QCA in celebration of the people and organizations who have been a light in the lives of people with disabilities and ignited a passion for inclusion at The Arc’s Catalyst Awards. Visit www.arcqca.org for bidding and tickets.

Grant Opportunity | LOIs for Nonprofit Capacity Building Grants | Due September 1, 2021
Quad Cities Community Foundation
Nonprofit Capacity Building Grants strengthen nonprofits by increasing their core systems and operations. By improving infrastructure at the organizational level, these time-limited projects help nonprofits more effectively carry out their missions. For more information on how to apply, contact Lisa Stachula at (563) 326-2840 or visit www.qccommunityfoundation.org/nonprofitcapacitybuilding.

HANDS Auxiliary Auction | October 2, 2021 | Modern Woodmen Park
Handicapped Development Center
Join HDC for an evening of entertainment, heavy hor’d’oeuvres, beverages, live and silent auctions, a TV raffle, and more. For tickets, contact Mary Egger at maryegger@hdcmail.org or call (563) 391-4834.

BASH 2021 | October 5, 8, and 12, 2021 | Scott Community College Culinary Arts & Hospitality Management Center
Scott Community College Foundation
Scott Community College will be hosting three small events on their brand new outdoor kitchen at the Culinary Arts & Hospitality Management Center. Attendees will enjoy food prepared and served with the help of the college’s Culinary Arts and Hospitality Management students. A virtual silent auction and an exciting raffle will be held. For more details, visit www.eicc.edu/sccbash.