Skip to content
Laird Norton Wealth Management
  • Services
          • Wealth Planning
            • Business Owner
            • Equity Compensation
            • Estate Strategies
            • Philanthropic Giving
            • Tax Strategies
          • Investment Management
            • Tax-Aware Investing
            • Risk Management
            • Alternatives & Private Market
            • Impact Investing
          • Trust Services
            • Beneficiary Services
            • Family Legacy
            • Trust Administration
            • Trust Benefits
            • Understanding Trusts
          • NonProfit Clients
            • Request RFP Participation
  • About
          • About LNWM
            • Fiduciary Financial Advisor
            • How We Help
            • Our Team
            • Corporate Social Responsibility
            • Careers
            • Community
            • Board of Directors
            • FAQs
        • two people in a kayak on water
  • Insights
        • Blog

          Top-of-mind at LNWM and elsewhere.

          Papers

          Expert insights and analysis.

          Videos

          See what we're up to.

          Media

          Our published work and media coverage.

  • Contact
Search Icon
Client Login
mobile-login

Home » Insights » Economic Flash » Economic Flash: Slow Labor Market Keeps Lid on Inflation, Rates

Economic Flash: Slow Labor Market Keeps Lid on Inflation, Rates

David Baker | Economic Flash | June 4, 2021 (June 4, 2021)

June 2021

US Economy: Rising prices.

The Fed’s preferred inflation gauge, Core PCE, rose 3.1% year-over-year, slightly faster than analyst expectations. Short-term supply disruptions as the economy reopens are one aspect driving the acceleration. Still, forward-looking measures such as the 10-year breakeven interest rate (2.5%) suggest inflation could remain elevated.

US Stocks: Value over growth.

With economic data largely meeting expectations, both large and small US equities posted modest returns in May marked by the ongoing trend of value stocks outperforming growth stocks. Energy (+9.0%), materials (+6.5%) and financials (+5.4%) were the market-leading sectors.

Foreign Stocks: Strong results.

Both the emerging and developed markets outpaced US equities in May. While China was positive, smaller global index components and countries that have been under the radar for the last 12 months, such as Hungary (+16.0%) and Poland (+13.7%), were the standouts.

Fixed Income: Inflation and flat rates?

Despite inflation expectations and Fed meeting minutes indicating a willingness to curb bond purchases later this year, US interest rates fell a few basis points in May, with the 10-year US Treasury yield resting below 1.6%. Weaker manufacturing and job creation data were contributing factors.

Real Assets: Mixed results.

Commodities in general continued their recent runup due to sourcing shortages and higher global demand, but returns were disparate. For example, while gold (+7.7%) and oil (+4.5%) each saw price increases, agricultural commodities such as wheat (-9.7%) and corn (-2.5%) fell on easing concerns over supply.

Alternatives: Uncorrelated strategies in favor.

Assets in hedge funds rose above $4 trillion, the highest level on record. Inflows into fixed-income-based strategies continued, but hedge funds long on stocks are seeing outflows, as investors look to lock in profits given equity valuations that seem stretched by some historical measures.

Equities Total Return

MAY YTD 1 YR
U.S. Large Cap 0.7% 12.6% 40.3%
U.S. Small Cap 0.2% 15.3% 64.5%
U.S. Growth (1.5%) 6.2% 40.5%
U.S. Value 2.4% 19.0% 46.3%
Int’l Developed 3.3% 10.1% 38.4%
Emerging Markets 2.3% 7.3% 51.0%

Fixed Income Total Return

MAY YTD 1 YR
Taxable
U.S. Agg. Bond 0.3% (2.3%) (0.4%)
TIPS 1.2% 1.1% 7.1%
U.S. High Yield 0.3% 2.3% 15.2%
Int’l Developed 1.1% (4.3%) 4.6%
Emerging Markets 2.1% 0.4% 10.0%
Tax-Exempt
Intermediate Munis 0.1% 0.3% 2.8%
Munis Broad Mkt 0.4% 1.0% 5.3%

Non-Traditional Assets Total Return

MAY YTD 1 YR
Commodities 2.7% 18.9% 46.2%
REITs 0.8% 18.1% 32.2%
Infrastructure 0.6% 7.2% 23.8%
Hedge Funds
Absolute Return (0.3%) 1.7% 7.3%
Overall HF Market 0.3% 3.2% 13.4%
Managed Futures 1.9% 7.6% 12.4%

Economic Indicators

MAY-21 NOV-20 MAY-20
Equity Volatility 16.8 20.6 27.5
Implied Inflation 2.5% 1.8% 1.2%
Gold Spot $/OZ $1907 $1777 $1730
Oil ($/BBL) $69 $48 $35
U.S. Dollar Index 111.3 114.4 122.9

Glossary of Indices

Our Take

With over 40% of the total US population fully vaccinated and more than 1 million doses being administered daily, we continue to expect a return to normalcy this summer. While some recent US economic data have been less robust than anticipated, in aggregate they still point to an economy growing faster than usual.

The focus for investors remains on the inflationary consequences of rapid growth, which have begun to present themselves in the data. While inflation has recently accelerated by most measures, a shortage of workers is putting a damper on new job creation and could act to contain price pressures. The labor shortage could dissipate relatively soon, however, as enhanced unemployment benefits end and workers feel safe to return to work post-Covid.

At this point, we think inflation will remain elevated and US interest rates are likely to resume their rise, but not to a problematic degree.

What We’re Doing

Our decision to maintain a higher stake in equities following the market recovery in 2020 has been rewarded. That said, we continue to look for ways to improve diversification in client portfolios and to protect from potential headwinds due to rising tax rates and inflation.

While we always maintain some inflation-countering exposure to real assets such as REITs, commodities, and infrastructure, we are making sure we are prepared should inflation accelerate more quickly or in a unique way relative to history. For example, the proliferation of renewable energy sources could keep a lid on energy prices, a key component of inflationary pressures in the past.

Another focus area is research and development to further our sustainable investment platform. We have provided sustainable investing solutions for more than 20 years and we continue to work to advance the analytical tools and evaluate new investments so that clients can be confident their portfolios meet both their financial objectives and reflect their values.

  • Share:

David Baker

David is Senior Director, Investment Strategy and Communications. at Laird Norton Wealth Management. While his focus is mainly on the numbers, David also writes the firm’s monthly Flash report, and he is a key contributor to LNWM’s quarterly investment outlooks.

Sign Up For Monthly Economic Flash

Find out how all major financial markets are performing and why.

Site Logo in footer footer logo
facebook Twitter Opens a news tab Linkedin Opens a news tab Youtube Opens a news tab

About

  • Board of Directors
  • Careers
  • Community
  • Contact
  • FAQs
  • Our Team
  • Sign up for Navigator

Services

  • Investment Management
  • Sustainable Investing
  • Tax Strategies
  • Trust Services
  • Understanding Trusts
  • Wealth Planning

Address

  • Laird Norton Wealth Management 801 Second Avenue, Suite 1600 Seattle, WA 98104 United States
  • 206.464.5100
  • 800.426.5105
© 2023 Laird Norton Wealth Management. All rights reserved.
Form CRSOpen PDF in a new tab Legal Terms and Conditions Privacy Policy
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to customize your settings.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-advertisement1 yearSet by the GDPR Cookie Consent plugin, this cookie is used to record the user consent for the cookies in the "Advertisement" category .
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
CookieDurationDescription
__cf_bm30 minutesThis cookie, set by Cloudflare, is used to support Cloudflare Bot Management.
bcookie2 yearsLinkedIn sets this cookie from LinkedIn share buttons and ad tags to recognize browser ID.
bscookie2 yearsLinkedIn sets this cookie to store performed actions on the website.
langsessionLinkedIn sets this cookie to remember a user's language setting.
lidc1 dayLinkedIn sets the lidc cookie to facilitate data center selection.
UserMatchHistory1 monthLinkedIn sets this cookie for LinkedIn Ads ID syncing.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
CookieDurationDescription
_uetsid1 dayBing Ads sets this cookie to engage with a user that has previously visited the website.
_uetvid1 year 24 daysBing Ads sets this cookie to engage with a user that has previously visited the website.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
_ga2 yearsThe _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors.
_gcl_au3 monthsProvided by Google Tag Manager to experiment advertisement efficiency of websites using their services.
_gid1 dayInstalled by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously.
_hjAbsoluteSessionInProgress30 minutesHotjar sets this cookie to detect the first pageview session of a user. This is a True/False flag set by the cookie.
_hjFirstSeen30 minutesHotjar sets this cookie to identify a new user’s first session. It stores a true/false value, indicating whether it was the first time Hotjar saw this user.
_hjIncludedInPageviewSample2 minutesHotjar sets this cookie to know whether a user is included in the data sampling defined by the site's pageview limit.
_hjIncludedInSessionSample2 minutesHotjar sets this cookie to know whether a user is included in the data sampling defined by the site's daily session limit.
_hjTLDTestsessionTo determine the most generic cookie path that has to be used instead of the page hostname, Hotjar sets the _hjTLDTest cookie to store different URL substring alternatives until it fails.
_omappvp11 yearsThe _omappvp cookie is set to distinguish new and returning users and is used in conjunction with _omappvs cookie.
_omappvs20 minutesThe _omappvs cookie, used in conjunction with the _omappvp cookies, is used to determine if the visitor has visited the website before, or if it is a new visitor.
calltrk_session_id1 yearThis cookie is set by the Provider CallRail. This cookie is used for storing an unique identifier for a user browser session. It is used for tracking the number of phone calls generate from the website.
vuid2 yearsVimeo installs this cookie to collect tracking information by setting a unique ID to embed videos to the website.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
_fbp3 monthsThis cookie is set by Facebook to display advertisements when either on Facebook or on a digital platform powered by Facebook advertising, after visiting the website.
_mkto_trk2 yearsThis cookie, provided by Marketo, has information (such as a unique user ID) that is used to track the user's site usage. The cookies set by Marketo are readable only by Marketo.
fr3 monthsFacebook sets this cookie to show relevant advertisements to users by tracking user behaviour across the web, on sites that have Facebook pixel or Facebook social plugin.
MUID1 year 24 daysBing sets this cookie to recognize unique web browsers visiting Microsoft sites. This cookie is used for advertising, site analytics, and other operations.
test_cookie15 minutesThe test_cookie is set by doubleclick.net and is used to determine if the user's browser supports cookies.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
_ce.gtldsessionNo description
_dc_gtm_UA-41670453-11 minuteNo description
_hjSession_275188330 minutesNo description
_hjSessionUser_27518831 yearNo description
AnalyticsSyncHistory1 monthNo description
BIGipServerab10web-nginx-app_httpssessionNo description
BIGipServerab47web-nginx-app_httpssessionNo description
calltrk_landing1 yearThis is a functionality cookie set by the CallRail. This cookie is used to store the landing page URL. It helps to accurately attribute the visitor source when displaying a tracking phone number.
calltrk_nearest_tld9 years 10 months 8 daysNo description
calltrk_referrer1 yearThis is a functionality cookie set by the CallRail. This cookie is used to store the referring URL. It helps to accurately attribute the visitor source when displaying a tracking phone number.
CookieLawInfoConsent1 yearNo description
li_gc2 yearsNo description
SAVE & ACCEPT
Powered by CookieYes Logo