This Weekly Market Update reviews the top market headlines: Fed Foresees Earlier Rate Increase, Commodity Rally Takes a Pause, Retail Sales Dip in May

Top Three Market Headlines

Fed Foresees Earlier Rate Increase: The Federal Reserve's policy-setting committee last week decided to maintain its current federal funds rate target range of 0 to 1/4 percent, though officials indicated they now expect to raise the rate to 0.6% by the end of 2023, sooner than previously announced. In addition, the central bank stated it would maintain its current bond-buying pace of $120 billion per month, but revealed that discussions have begun about eventually reducing, or tapering, the program, which was initiated in response to the economic fallout of the pandemic. The announcements come amid the strong economic rebound and growing concerns about higher inflation.

Commodity Rally Takes a Pause: Certain commodities that experienced surging prices earlier this year have seen sharp reversals in recent weeks, raising questions about the sustainability of the strong post-pandemic rebound across the commodities complex. For instance, lumber futures prices have fallen by almost half after hitting record highs in early May, while corn and copper futures have dropped by nearly 23% and 15%, respectively, over the same time period. Sharp declines came last week on the heels of the Federal Reserve's accelerated rate hike forecast and resulting upward pressure on the U.S. dollar, both of which tend to pressure commodity prices in general. In addition, China recently announced steps to release key metal reserves to limit pricing pressures of such commodities.

Retail Sales Dip in May: The Commerce Department reported last week that retail sales dipped 1.3% in May from the prior month, the first drop in three months. Rapidly rising prices stunted consumer demand for big-ticket items such as autos, electronics, and building materials; instead, consumers shifted attention to services, which continued to rebound as the economic reopening gathered steam. For instance, spending at restaurants and bars rose 1.8%, pushing the level of sales above pre-pandemic levels. Notably, spending at casinos rose almost 17%, while theme parks and indoor entertainment centers saw increases of 9%.

As of June 18, 2021 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World -1.86% 5.25% 10.06% 35.83%
S&P 500 -1.87% 5.21% 11.71% 35.87%
Russell 2000 -4.17% 0.96% 13.78% 58.51%
MSCI EAFE -2.40% 5.26% 8.92% 31.07%
MSCI Emerging Markets -1.45% 3.87% 6.25% 39.55%
FTSE NAREIT -3.57% 11.50% 21.40% 32.82%
Bloomberg Commodity -4.27% 8.98% 16.52% 41.93%
Barclays U.S. Aggregate 0.11% 1.84% -1.60% -0.11%

CNBC 06/17/21, WSJ 06/16/21, 16/18/21, US Census Bureau, 6/15/21; data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.