Even as the Federal Reserve (Fed) has been undertaking aggressive monetary policy designed to clamp down on rising prices, inflation continued to accelerate — increasing 9.1% in June. How significant will this be for the Fed’s policy moving forward? 

Here are three questions for investors to consider:

Does recent inflation numbers mean the Fed’s policies aren’t working?

No. It takes time for higher interest rates to work their way through the system to knock down demand and put downward pressure on prices. The question is not whether — but how quickly — inflation will drop back toward 2%. Early indicators suggest the policies are effective. Wage growth, which is an important marker for the Fed, has been slowing. Financial conditions have tightened considerably, so it’s become more difficult and expensive for companies to do business. With real yield on the 10-year Treasury up 175 bps and mortgage rates doubling since the...

We see indications of positive trends for equities, even as risks remain elevated. We believe there is more upside potential, which represents an opportunity for investors to benefit from exposures to risky assets.

As the COVID-19 pandemic continues to unfold, the Return to Normal Index measures human activity data relative to prepandemic levels. The index is constructed by our data scientists and fundamental analysts and tracks activities in the U.S., including travel, returning to work and school, brick-and-mortar shopping and eating out at restaurants. By design, the index is focused on measuring components of daily life rather than economic indicators like GDP growth. The percentage level moves closer to 100 as daily life normalizes, and our analysts update it monthly.

The housing market emerged red-hot from the pandemic, with the median U.S. home price hitting a record $363,300 in June — up 23.4% from the previous year.1 We believe this robust housing recovery is driven by long-term demographic trends, as well as strong earnings and household balance sheets, rather than just a temporary pull-forward of demand. Here are some recent developments and their potential impact on our view of the housing market: 

Strong demand should persist, despite flattening out. Increased demand began to emerge prepandemic. Millennials began to have children, which is typically the catalyst for moving into a single-family home. During the pandemic, demand surged. Trends to move out of urban centers and into single-family housing accelerated. Demand for new homes (reflected in homebuilder sentiment) has come down slightly but remains near historically high levels.

Home supply has become constrained.  The inventory of for-sale homes...

The continuing concerns about the transmission of the Delta variant has forced us to make a difficult decision. Due to the expected size and scale of our 700-person event, we believe it is in the best interest of the health and safety of our guests to cancel the in-person Invest in Others Awards Gala on September 22. The decision has been made to switch to a virtual format to honor this year’s nominees.

The Biden administration has recently made proposals for higher maximum income tax and corporate tax rates, although they’re still relatively low from a historical perspective. The proposed capital gains rate would be a new high, but it would apply to a limited universe of high-income taxpayers.*

Interest rates are a primary driver of fixed-income returns, so investors need to know when — and how — to prepare for rate changes. The Federal Reserve has various direct and indirect levers to guide interest rates. But rates also change because of market expectations. Here are three events to keep in mind:

As the U.S. continues its COVID-19 vaccination program, the Return to Normal Index measures human activity data relative to prepandemic levels. The index is constructed by our data scientists and fundamental analysts and tracks activities in the U.S., including travel, returning to work and school, brick-and-mortar shopping and eating out at restaurants. By design, the index is focused on measuring components of daily life rather than economic indicators like GDP growth. The percentage level moves closer to 100 as daily life normalizes, and our analysts update it monthly.

Interest rates are a primary driver of fixed-income returns, so investors need to know when — and how — to prepare for rate changes. The Federal Reserve has various direct and indirect levers to guide interest rates. But rates also change because of market expectations. Here are three events to keep in mind:

Equities continue to be attractive in absolute terms and relative to other asset classes. Only the fear of overexuberance and lofty valuation levels keeps us from being more optimistic about equity markets. We believe tilts toward risky assets will be rewarded as global growth reaccelerates.

In the very first episode of our new fixed-income podcast, Credit Threads, our fixed-income specialists discuss how central banks respond to financial conditions, how they impact bond investing and how fund managers factor financial conditions into their decision-making. Featuring: Gene Tannuzzo, Global Head of Fixed Income at Columbia Threadneedle Investments; Ed Al-Hussainy, Senior Rates & Currency Analyst at the firm; and Adrian Hilton, Head of Global Rates and Currency.

As the U.S. continues its COVID-19 vaccination program, the Return to Normal Index measures human activity data relative to prepandemic levels. The index is constructed by our data scientists and fundamental analysts and tracks activities in the U.S., including travel, returning to work and school, brick-and-mortar shopping and eating out at restaurants. By design, the index is focused on measuring components of daily life rather than economic indicators like GDP growth. The percentage level moves closer to 100 as daily life normalizes, and our analysts update it monthly.

Inflation is not always a bad thing

Sustained high inflation can raise the cost of living and stunt business growth. But low and predictable levels of inflation, like what we’ve experienced over the past 20 years, are generally viewed as having a positive influence on supply and demand, employment and economic growth. 

One reason the markets may be reacting strongly to higher inflation numbers today is the historically low inflation environment we’ve enjoyed since the turn of the century. For most of that time — and through two broad economic cycles — inflation has remained low and range-bound. Over the period as a whole, it has trended downward.   

Josh Kutin explains the two types of allocation — capital and risk — the differences between them and why it matters. Hear how his approach to risk allocation is informed by a market state classification system and how it may be possible to better mitigate portfolio drawdowns.

Inflation is not always a bad thing

Sustained high inflation can raise the cost of living and stunt business growth. But low and predictable levels of inflation, like what we’ve experienced over the past 20 years, are generally viewed as having a positive influence on supply and demand, employment and economic growth. 

One reason the markets may be reacting strongly to higher inflation numbers today is the historically low inflation environment we’ve enjoyed since the turn of the century. For most of that time — and through two broad economic cycles — inflation has remained low and range-bound. Over the period as a whole, it has trended downward.   

Last summer, at the height of the COVID-19 crisis, I bought and built a swing set for my grandchildren. Construction was reasonably straightforward and, remarkably for a kit, all the holes, bolts, etc. lined up easily. Savvy readers will see my setup here: swing set as a metaphor for the economy, recovery and the subsequent expansion of economic activity through additional stimulus introduced by the Biden administration. But let me explain further…

A swing is a pendulum with an obvious resting point. This is convenient as it allows my grandchildren ease of access. Initially, the children were content to gently swing back and forth, but quite quickly this was followed by a demand to go higher. I was happy to concur (what is the point in going slowly?) so I pushed with greater energy. As I watched the children’s reactions, I made three observations:

1)    Howling children 2)    Scowling grandma 3)    The frame of...

As the U.S. continues its COVID-19 vaccination program, the Return to Normal Index measures human activity data relative to prepandemic levels. The index is constructed by our data scientists and fundamental analysts and tracks activities in the U.S. including travel, returning to work and school, brick-and-mortar shopping and eating out. By design, the index is focused on measuring components of daily life rather than economic indicators like GDP growth. The percentage level will move closer to 100 as daily life normalizes, and our analysts will update it on a regular basis.

Josh Kutin explains the two types of allocation — capital and risk — the differences between them and why it matters. Hear how his approach to risk allocation is informed by a market state classification system and how it may be possible to better mitigate portfolio drawdowns.

An asset that’s often misunderstood

While equity awards are a big component of compensation for pre-IPO companies, they’re also increasingly offered to a broader set of employees at dynamic publicly held companies. This trend can create significant opportunities for advisors to add value to a growing segment of clients — many of them younger and in need of long-term planning.

Our experience with employees receiving stock awards is that many of them don't understand the basics of this type of compensation. Even fewer understand the nuances. And that’s understandable since award programs can vary significantly from one company to another — and even between employees at the same company. 

Advisors can add value to their clients with equity compensation in three key ways: