Inflation, Shutdowns, Spending

July 27, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury

July 26, 2021

Someone once said, “technology has never moved this fast, and at the same time, will never move this slow again.” So true! A partial list of recent technological advances includes: messenger RNA (mRNA) gene therapies, 5G wireless, blockchain, the cloud, low orbit communication satellites (Starlink), vertical indoor farming, and much more.

At the same time, the government in the United States has never been larger or more intrusive. This makes economic forecasting and investing a balancing act between the “supply side” of new technology and the “demand side” of government intervention.

Case in point is the Federal Reserve, which meets this week. The Fed is far less concerned than it should be about falling behind the curve on inflation. As a result, we don’t expect any significant changes to monetary policy.

Obviously, the Fed is still a long way off from raising shortterm interest rates. But, as we explained as far back as mid-June when the 10-year Treasury Note yielded roughly 1.5%, financial markets are much better prepared for an announcement about tapering and the eventual end of quantitative easing than they were back in 2013 under Fed Chair Ben Bernanke, when we witnessed the “taper tantrum.” In other words, we think the Fed will continue to kick the can down the road, though it shouldn’t.

The consumer price index is up 5.4% versus a year ago and up at a 3.5% annualized rate since February 2020, preCOVID. The Fed’s preferred measure of inflation is the PCE deflator. We think this was up about 0.7% in June (to be reported Friday). If so, this inflation measure is up 4.1% from a year ago and up at a 2.9% annualized rate versus February 2020. Yes, some of this inflation represents temporary supply-chain issues. But it also reflects overly loose monetary policy. The M2 measure of the money supply has soared 32% since COVID hit, something that didn’t happen during or after the Financial Crisis in 2008-09. Those assuming inflation gets back to a roughly 2.0% trend in 2022 are in for a rude awakening.

But inflation shouldn’t be our only government worry. Even though hospitalizations and deaths remain way down versus previous spikes, the media has been amplifying any negative news it can find on the “Delta” variant and we can’t casually dismiss the possibility that some places around the country are going to re-tighten limits on economic activity and schools later this year.

Our best guess, though, is that the hurdle to re-imposing strict limits is going to be very high. Republican states have generally supported looser restrictions, while Democratic states more often supported tighter restrictions. With elections right around the corner, there are reasons to expect a less restrictive response on average.

Meanwhile, policymakers are fighting about two measures to increase federal spending over the next several years. The first measure is a bipartisan infrastructure deal to raise spending by about $1 trillion, although some of the spending may be repurposed from other programs. No guarantees, but our best guess is that this measure eventually dies.

The other measure would be a purely partisan Democrat effort to boost spending by up to $3.5 trillion over the next several years. The momentum behind this effort is waning because the US has already pushed through nearly $5 trillion in spending bills during the pandemic and it only takes one “no” vote from a Democratic senator to kill it. However, Democrats have a great deal of political capital invested in the idea of “human infrastructure” and tax hikes, and this legislation is far from dead.

The economy is healing rapidly, the bull market remains intact and technology is raising potential future growth. But, government actions could undermine these positive trends. For now, we remain bullish.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

7-26 / 9:00 am New Home Sales – Jun 0.796 Mil 0.802 Mil 0.676 Mil 0.769 Mil

7-27 / 7:30 am Durable Goods – Jun +2.0% +2.6% +2.3%

7:30 am Durable Goods – Jun +0.8% +0.4% +0.3%

7-29 / 7:30 am Initial Claims - Jul 20 382K 380K 419K

7:30 am Q2 GDP Advance Report 8.5% 8.3% 6.4%

7:30 am Q2 GDP Chain Price Index 5.4% 4.9% 4.3%

7-30 / 7:30 am Personal Income – Jun -0.4% -1.0% -2.0%

7:30 am Personal Spending – Jun +0.7% +0.5% 0.0%

8:45 am Chicago PMI 64.0 69.0 66.1

9:00 am U. Mich Consumer Sentiment- Jul 80.8 81.0 80.8

The attached information was developed by First Trust, an independent third party. The opinions are of the listed authors at First Trust Advisors L.P, and are independent from and not necessarily those of RJFS or Raymond James. All investments are subject to risk. There is no guarantee that these statements, opinions, or forecasts provided in the attached article will prove to be correct. Individual investor's results will vary. Past performance does not guarantee future results. Forward looking data is subject to change at any time and there is no assurance that projections will be realized. Any information provided is for informational purposes only and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Strong Growth in Q2

July 19, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

July 19, 2021

Another quarter for consumers to rely on massive stimulus payments, extremely loose monetary policy, and the continued re-opening of the US economy combined to push real GDP up at a very rapid pace in the second quarter, with the federal government preparing to release its initial estimate of economic growth on July 29.

At present, we are estimating that real GDP grew at an 8.3% annual rate in Q2, an acceleration from the 6.4% growth rate in Q1 and, with the exception of the massive surge in output in the third quarter of 2020, which offset the massive plunge in production in Q2 of 2020, the fastest growth rate for any quarter since the early 1980s.

Remember, though, that much of the recent rapid growth we’ve seen is really just a “sugar high.” Look for economic growth to slow in the second half of the year, and then even more so in 2022.

In the meantime, it’s important to recognize that although rapid growth is welcome, that the economic glass remains half empty. Yes, real GDP likely hit a new all-time high. Yes, if our estimate is correct, real GDP will be up 0.7% annualized versus the last quarter of 2019, which is when we hit the previous peak in quarterly real GDP.

However, in the absence of COVID-19, the economy almost certainly would have grown faster than that pace in the meantime, which means that, even at an all-time high, real GDP is still smaller than it would have been if COVID had never happened.

Note, also, that as the economy emerges from the COVID disaster, changes in international trade flows and inventories can have an outsized effect on GDP numbers. A day before the government releases the GDP report it will release some preliminary figures for trade and inventories in June, which may alter our forecast.

In the meantime, an 8.3% growth rate is our best estimate and here’s how we get there:

Consumption: Car and light truck sales rose at a 3.7% annual rate in Q2, while “real” (inflation-adjusted) retail sales outside the auto sector soared at a 12.7% annual rate. We only have reports on spending on services through May, but it looks like real services spending should be up at a rapid rate, as Americans got back toward normal (think recreation, restaurants, bars,…etc.). As a result, we estimate that real consumer spending on goods and services, combined, increased at a 9.8% annual rate, adding 6.7 points to the real GDP growth rate (9.8 times the consumption share of GDP, which is 68%, equals 6.7).

Business Investment: The second quarter should continue the pattern of recovery, led by investment in business equipment. Investment in intellectual property should also gain, as usual, and we may eke out a small gain in commercial construction, as well. Combined, business investment looks like it grew at a 7.6% annual rate, which would add 1.0 points to real GDP growth. (7.6 times the 13% business investment share of GDP equals 1.0).

Home Building: Residential construction continued to grow in Q2, although not as quickly as in recent prior quarters, a reflection of higher construction costs and less labor availability. Look for faster growth in this sector in the year ahead as excessive jobless benefits run out. We estimate growth at a 2.1% annual rate in Q2, which would add 0.1 point to the real GDP growth. (2.1 times the 5% residential construction share of GDP equals 0.1).

Government: It’s hard to translate government spending into GDP because only direct government purchases of goods and services (and not transfer payments like extra unemployment insurance benefits) count when calculating GDP. We estimate federal purchases grew at a 1.1% annual rate in Q2, which would add 0.2 points to real GDP growth. (1.1 times the 18% government purchase share of GDP equals 0.2).

Trade: Faster economic growth in Q2 brought a larger trade deficit (at least through May), a by-product of a faster recovery in the US than in Europe. At present, we’re projecting net exports will subtract 0.2 points from real GDP growth in Q2.

Inventories: Inventories look like they fell again in Q2 as businesses with supply-chain issues had to dip into inventories to meet strong consumer demand. However, inventories didn’t fall as rapidly as they did in Q1, and in the arcane world of GDP accounting, that means inventories will make a positive contribution to growth in Q2, which we are estimating at 0.5 points.

Add it all up, and we get 8.3% annualized real GDP growth for the second quarter, very high by historical standards, but representing an economy that is still smaller than it would have been in the absence of COVID.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

7-20 / 7:30 am Housing Starts – Jun 1.590 Mil 1.590 Mil 1.572 Mil

7-22 / 7:30 am Initial Claims - Jul 18 350K 364K 360K

9:00 am Existing Home Sales – Jun 5.900 Mil 5.800 Mil 5.800 Mil

4,500... Or Higher

July 13, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

July 12, 2021

Many are convinced that a US stock market correction, or even a bear market, is inevitable. So, when the S&P 500 was down 1.6% last Thursday, many thought it had arrived. Then, the S&P 500 rebounded and hit a new all-time high on Friday. Being bearish on equities has not worked for a long time.

This does not mean the market always goes up. It doesn’t mean that the government is not creating future problems. But, we don’t try to time the market. What we do is focus on fundamentals, like profits and interest rates. And right now, we believe the S&P 500 is still undervalued.

Late last year, when the S&P 500 was at 3,638, we used those fundamentals to project a year-end 2021 target of 4,200, for an increase of 15.4%. However, with profits returning toward normal even faster than we had anticipated, the S&P 500 hit 4,185 in mid-April and we upped our projection to 4,500, which would be a full-year gain of about 19%.

Now, with the S&P 500 just 3% from our target, we choose to stand pat. Why? We do not want to leave the impression that we are traders, shifting our target over and over. We are investors. It’s the long-term that matters. The US stock market has been undervalued relative to our Capitalized Profits Model since 2009.

Our model takes the government’s measure of economywide profits from the GDP reports, discounted by the 10-year US Treasury note yield, to calculate fair value. If we use a 10-year Treasury yield of 1.36% (Friday’s closing yield) to discount profits (from the first quarter, the most recent available), then our model suggests the S&P 500 is 45% undervalued. And with profits likely to grow 20% or more this year, fair value will rise more as the year unfolds.

Right now, the Fed is artificially holding interest rates down across the yield curve. So, when we calculate our estimate of fair value, we use a 2.0% 10-year yield. Using this 2.0% rate gives us a fair value of 5,240. It would take a 10- year yield of about 2.4% for our model to show that the stock market is currently trading at fair value (with no increase in profits.) If rates do rise, because the economy is stronger than the Fed expects, it would likely be accompanied by even faster profit growth.

We fully understand that current monetary policy is inflationary, and that past government spending, plus what some politicians are asking for right now has lifted US Federal debt above 100% of GDP.

These policies could shift economic growth, the level of interest rates and our estimate of the fair value of stocks in the years ahead. But for the foreseeable future, re-opening, easy money and deficit spending are all pushing economic growth and profits up. With the Fed holding rates down and profits booming, and with our model saying stocks are undervalued, we are still bullish. And right now we think if our 4,500 target is wrong, it is likely too low.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

7-13 / 7:30 am CPI – Jun +0.5% +0.5% +0.6%

7:30 am “Core” CPI – Jun +0.4% +0.3% +0.7%

7-14 / 7:30 am PPI – Jun +0.6% +0.6% +0.8%

7:30 am “Core” PPI – Jun +0.5% +0.4% +0.7%

7-15 / 7:30 am Initial Claims Jul 10 350K 370K 373K

7:30 am Import Prices – Jun +1.1% +0.6% +1.1%

7:30 am Export Prices – Jun +1.4% +0.9% +2.2%

7:30 am Empire State Mfg Survey – Jul 18.0 20.0 17.4

7:30 am Philly Fed Survey – Jul 28.0 30.0 30.7

8:15 am Industrial Production – Jun +0.6% +0.7% +0.8%

8:15 am Capacity Utilization – Jun 75.6% 75.7% 75.2%

7-16 / 7:30 am Retail Sales – Jun -0.4% -0.5% -1.3%

7:30 am Retail Sales Ex-Auto – Jun +0.4% +0.3% -0.7%

9:00 am Business Inventories – May +0.5% +0.6% -0.2%

9:00 am U. Mich Consumer Sentiment- Jul 86.5 87.0 85.5

"Twin Deficits" Won't Tank the Dollar

July 7, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

July 6, 2021

Many analysts have been thinking and writing about the “twin deficits” and whether the record-breaking size of those two deficits, combined, mean the US dollar is about to plummet versus other currencies.

Before we get into the weeds, a little background is necessary. When people talk about the twin deficits they are talking about the budget deficit plus the trade deficit. Combined, these two deficits were 22.8% of GDP in the year ending in the first quarter, easily the highest on record. Before the pandemic, the record high was 12.8% of GDP back in 2009. Before the Financial Crisis, previous peaks included 8.7% in 2004-05 and 8.0% back in 1985-86.

The reason they are called the “twin” deficits is that superficial Keynesian theory suggest they should go together. The idea is that if the United States runs a larger budget deficit, it should have higher interest rates, which should drive up the value of the dollar. In turn, a higher dollar means more imports (we can buy more stuff!) and lower exports (foreigners buy less because it costs them more to get dollars).

This theory seemed to work in the 1980s. Budget deficits grew under President Reagan, mostly because of more defense spending, and so did the trade deficit.

However, the theory fell apart in the 1990s, when the budget deficit fell (and even turned into surpluses). If the theory held, you’d expect the trade deficit to shrink, too. But that didn’t happen. In fact, the current account deficit, which is the most comprehensive measure of the trade deficit, hit a new peak at 3.9% of GDP in 2000, even higher than the peak of 3.3% in the late 1980s.

What this showed was that the old Keynesian theory behind the twin deficits was too superficial and the two deficits don’t have to move in tandem. What really matters isn’t whether the government runs a larger or smaller budget deficit; what matters is the set of policies the government is implementing.

In the 1980s, the Reagan Administration cut tax rates, deregulated, and got inflation under control. All of these policies made the US a better place to invest. Those policies attracted capital from the rest of the world, which pushed up the dollar and also increased the trade deficit.

In the 1990s, a large combination of factors helped the economy and also reduced the budget deficit. These include lower inflation (which reduced the effective capital gains tax rate), the “peace dividend” (which allowed for less military spending), President Clinton holding to the federal spending caps inherited from President Bush, the failure of Clinton-care, enacting welfare reform and Medicare reform, free trade pacts, and the natural aging of Baby Boomers into their peak earning years.

All of these helped reduce the budget deficit, but they also made the US a better place to invest. And being a better place to invest meant a higher dollar and an increase in the trade deficit. So, in the 1990s, the twin deficits were not twins at all: the budget deficit went down and the trade deficit went up.

Right now, the combined twin deficit is at a record high. But notice that almost all the increase is due to the budget deficit. The trade deficit is larger than it was a year ago, but is roughly the average it’s been for the past twenty years.

Now, ask yourself, since the onset of COVID, since when the budget deficit has soared, has the US adopted policies to improve its long-term growth potential? Have we cut tax rates? Have we deregulated? Have we reigned-in or reformed government spending programs or made them more actuarially sound? No, we have not, unfortunately. What we have done is spent future taxpayers’ money like there is no tomorrow to generate some extra economic growth in the short-term.

The pandemic-related policy set in the US is not as dollar friendly or investment-friendly as what we did in the 1980s or 1990s. However, because every other country has done similar things, the US is a relative safe-haven for economic activity versus others.

Considering all this, we do not expect a massive increase in the trade deficit to match the surge in the budget deficit. The lack of a massive trade deficit to match the budget deficit is important for forecasting the dollar because a massive trade deficit could put political pressure on the Federal Reserve to reduce the exchange value of the dollar by postponing rate hikes. Again, we don’t see that happening.

But at least it brings us back to what really matters for predicting future changes in the value of the dollar: monetary policy. Forecasting changes in the dollar is probably the toughest part of managing assets. And, right now, we are not forecasting the dollar to either plunge or soar in the next year.

The one thing we do know is that if the dollar does make a big move in either direction, it won’t be because of what we already know about the twin deficits.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

7-6 / 9:00 am ISM Non Mfg Index – Jun 63.5 63.7 60.1 64.0

7-8 / 7:30 am Initial Claims – July 3 350K 381K 364K

2:00 pm Consumer Credit– May $18.3 Bil $18.0 Bil $18.6 Bil

June Market Recap

July 1, 2021 Tyler Goodrich

July 1, 2021

June Market Review

Dear Friends and Clients,

Inflation was top of mind for investors throughout June as the Core Consumer Price Index (CPI) notched its highest increase since 1992. “While it appears the inflation genie has peeked out of the bottle with CPI at 3.8%, the Fed has been granted its wish, convincing the markets of a strong economy and temporary inflation that should trend back toward the 2% long-term goal by next year,” says Larry Adam, chief investment officer.

Despite what are expected to be transitory inflation pressures, the growth outlook for this year remains strong. Recent data suggests a quick recovery as the economy reopens, but the pace may not be quite as brisk over the second half of the year, says Chief Economist Scott Brown. Rapid growth has strained supply chains and there are enormous difficulties in matching millions of unemployed workers to available jobs, although Brown expects those issues to resolve over time.

Bipartisan negotiations continue in Washington, D.C., around tax changes, national spending and the infrastructure bill. With the path forward highly uncertain, domestic equity markets may experience increased volatility over the later part of the summer, says Washington Policy Analyst Ed Mills.

Here’s where we are so far this year:

On stocks and bonds

Short to short-intermediate interest rates are slightly up for the month, while longer duration Treasury yields are down. On a relative basis, all sectors continue to experience very tight spreads. The narrowed yield curve has stoked some concern about the health of the recovery. The economic recovery is on solid footing, believes Joey Madere, senior portfolio analyst of Equity Portfolio & Technical Strategy. Low rates and lower credit spreads seem supportive of equity markets at this point in time.

Attention turned to future actions by the Federal Open Market Committee, specifically whether the committee members might consider an increase to the fed funds rate sooner than expected. Keeping it in context, “sooner” is likely 1.5 years away, notes Doug Drabik, managing director for fixed income research.

The Fed continues to be accommodative and is still purchasing $120 billion in Treasury and mortgage-related products monthly.

Overseas

The G7 meeting saw commitments toward climate change, a reduction in the use of coal and the earmarking of 1 billion vaccines for developing countries. European fiscal policy hasn’t changed much despite improved economic growth prospects and inflation expectations. Some COVID-19-related travel restrictions remain in place, slightly hindering regional summer holidays, although U.K. and European markets continued their upward trend, adding to year-to-date gains, explained European Strategist Chris Bailey. In Asia, regional equity market performance remains lackluster, and China’s financial decision-makers appear concerned with limiting any inflationary threats.

Also of note is Iran’s presidential election and its potential impact on oil supply and pricing. Oil prices ended June near pandemic-era highs. Iran President-elect Ebrahim Raisi’s nationalist tendencies may complicate ongoing nuclear negotiations and limit the prospect of lifting U.S. sanctions imposed on the country’s oil exports. A snag in negotiations means the export of 1.5 to 2 million barrels per day could be at stake, representing just under 2% of global supply, according to Energy Analyst Pavel Molchanov.

The bottom line

The economic recovery remains robust, with the equity market continuing to reach new heights. Savvy stock investors should consider using temporary pullbacks in certain sectors as an opportunity to strategically add to their portfolios. There is also a continuation of money being added to the economy and we should expect a continuation of the expected consequences: Stocks continue to go up and yields continue to fall.

As always, I thank you for your continued confidence in me. I’ll be sure to keep my eyes on the markets and relate anything of relevance. If you have any questions, please reach out at your convenience.

Sincerely,

Matt Goodrich, Financial Advisor

President, Goodrich & Associates, LLC

Branch Manager, RJFS

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the authors and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Consumer Price Index is a measure of inflation compiled by the U.S. Bureau of Labor Studies. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small-cap securities. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges, which would reduce an investor’s returns. Small-cap securities generally involve greater risks. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks. These risks may be greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation, and may not be suitable for all investors.

Material prepared by Raymond James for use by its advisors.

Who Will Be the Next Fed Chief?

June 28, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

June 28, 2021

One of the key decisions President Biden will make later this year is who is going to run the Federal Reserve for the next four years. Current Fed chief Jerome Powell’s term as chairman runs out in February 2022. We think the choice will ultimately come down to two people: Roger Ferguson or Jerome Powell.

The case for Roger Ferguson is easy. First, presidents like to appoint people from their own party and Ferguson is a Democrat. Second, Ferguson already has experience at the Fed, having been appointed as a Governor and then Vice-Chairman by President Clinton in the late 1990s and serving through 2006.

Third, Ferguson has both a law degree and Ph.D. in economics from Harvard. Fourth, he was the CEO at TIAACREF for almost thirteen years after leaving the Fed. And last, he would be the first Fed chief of African descent, which should make him politically attractive to the president. Notably, Ferguson retired from TIAA-CREF in March, which means he’s available at a moment’s notice.

However, we also think Biden will take a long hard look at re-appointing Powell. The last “dot plot” from the Fed, setting out projections for the future path of monetary policy, showed seven policymakers thinking short-term interest rates will rise in 2022 and a majority (13 of 18) thinking rates will go up by the end of 2023. In fact, the “median dot” shows two rate hikes (25 basis points each) by the end of 2023. And yet, based on our interpretation of his comments after the meeting and since, Powell is likely to be one of the policymakers projecting no rate hikes through 2023.

So, if you’re Biden, and you want the Fed to postpone rate hikes as along as possible, Powell makes an attractive choice. As chairman already, he has both credibility with the financial markets as well as inside knowledge of how other policymakers are thinking about monetary policy. Based on his experience, he might be better prepared to privately debate more hawkish policymakers and convince them to hold off on rate hikes.

Plus, even though Biden would like to reward someone from his own party, like Ferguson, Powell is a Republican and the political situation later this year might favor re-appointing Powell as a gesture of bipartisanship, like Clinton re-appointing Alan Greenspan twice.

Other possible appointees include current Fed governor Lael Brainard and Treasury Secretary (and former Fed chief) Janet Yellen. Both would be qualified, but Yellen’s previous chairmanship has already broken a “glass ceiling” for women, Yellen seems interested in staying at Treasury and Brainard might be too dovish to convince more hawkish policymakers that they should hold off on rate hikes in 2022-23.

Regardless of who Biden picks, if we are right about inflation outstripping the Fed’s expectations next year, the next chairman will face a potential mutiny starting late next year. Monetary policy is extremely loose right now and likely to stay that way. But there is no financial crisis; markets are working fine. Yes, some of the inflation is “transient” – used car prices are not going to keep soaring like they have recently – but just wait until rents start going up later this year when limits on evictions are removed.

Whomever Biden appoints to run the Fed is going to have his hands full.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

6-30 / 8:45 am Chicago PMI - Jun 70.0 74.4 75.2

7-1 / 7:30 am Initial Claims - Jun 26 389K 387K 411K

9:00 am ISM Index – Jun 61.0 61.1 61.2

9:00 am Construction Spending – May +0.4% +1.1% +0.2%

afternoon Total Car/Truck Sales – Jun 17.0 Mil 16.0 Mil 17.0 Mil

afternoon Domestic Car/Truck Sales – Jun 12.4 Mil 12.2 Mil 12.6 Mil

7-2 / 7:30 am Non-Farm Payrolls – Jun 700K 675K 559K

7:30 am Private Payrolls – Jun 600K 550K 492K

7:30 am Manufacturing Payrolls – Jun 25K 20K 23K

7:30 am Unemployment Rate – Jun 5.6% 5.7% 5.8%

7:30 am Average Hourly Earnings – Jun +0.4% +0.4% +0.5%

7:30 am Average Weekly Hours – Jun 34.9 34.9 34.9

7:30 am Int’l Trade Balance – May -$71.3 Bil -$71.8 Bil -$68.9 Bil

9:00 am Factory Orders – May +1.5% +1.3% -0.6%

The "Fake Tight" Labor Market

June 24, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

June 21, 2021

Is the United States’ job market tight? Well, that totally depends on your perspective.

From a national perspective, it certainly isn’t tight. Total nonfarm payrolls were 144.9 million in May 2021, still down 7.6 million from February 2020, right before the COVID shutdowns. In addition, when asked, 9.3 million American workers say they are still looking for a job, up 3.6 million during the same timeframe.

The labor force participation rate, which is the share of those age 16+ who are either working or looking for work, was only 61.6% in May. Pre-COVID, you’d have to go back to 1977 to find a level that low. Immediately prior to COVID, the participation rate was 63.3%. In other words, the United States is awash in unemployed and available workers.

But none of this seems to matter if you’re an employer. Average hourly earnings are up a rapid 6.4% versus February 2020, while companies have roughly 9.3 million open jobs. Almost 4 million people quit their jobs in April, the highest on record, and a record-high 2.7% of total employment. If you’re an employer and, even after raising wages, it’s hard to find workers for open positions and keep the workers you have, it certainly is a “tight” labor market.

So, what is going on? Is the job market tight, or not? We think the best way to describe it is “fake tight.”

The key problem with the labor market right now is that the government is still giving out unemployment benefits far in excess of what the situation demands. Sending out these jobless benefits might have made sense in the early days of the pandemic, back when the government’s shutdown-heavy response to COVID-19 amounted to a “taking” of many people’s businesses and livelihoods. That was an incredibly unusual situation. And while we think it was a mistake, if the government “takes” away your job for public health reasons, it’s logically consistent to “compensate” you for it.

But, at this point, with the economy open, and baseball stadiums packed with unmasked people in Los Angeles and Chicago, the time for excess benefits has long passed; it’s time to get back to normal.

In fact, the entire government response needs to be rethought. The Federal Reserve is still holding interest rates near 0% and buying $120 billion worth of bonds every month, as if the US were still in a financial crisis. If there is a problem with the economy, the Fed is exacerbating it by helping to finance the governments competition with the private sector. The Fed’s buying government debt to finance redistribution, perpetuates the unemployment problem and hurts business.

And this may be worse than many investors think. While there are 9.3 million people counted as unemployed, current regular and special pandemic-relief programs are paying 14.8 million people unemployment benefits. The difference is largely due to the special temporary laws allowing people to collect jobless benefits even if they’re not looking for work. Usually that’s a No-No, but Congress decided to waive the job seeking requirement due to COVID.

No one knows the end result of all these “unprecedented” policies. And since they were started in response to economic shutdowns, they should end as the economy opens up. What the US should do is either cancel them immediately or repurpose this money to “infrastructure” so that economy-killing tax hikes are not part of the current budget plans.

In the meantime, the system is awash in money. This lifts asset values, in spite of problems in the labor market. Moreover, interfering with the dynamics of the labor market reduces output while increasing consumption, which is a recipe for inflation. We think all these problems are easy to see. If the labor market really was “tight,” the Fed would not need to be so easy. And a “fake tight” labor market needs less accommodation, too.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

6-22 / 9:00 am Existing Home Sales – May 5.710 Mil 5.790 Mil 5.850 Mil

6-23 / 9:00 am New Home Sales – May 0.867 Mil 0.868 Mil 0.863 Mil

6-24 / 7:30 am Initial Claims - Jun 19 380K 390K 412K

7:30 am Q1 GDP Final Report 6.4% 6.5% 6.4%

7:30 am Q1 GDP Chain Price Index 4.3% 4.3% 4.3%

7:30 am Durable Goods – May +2.8% +1.8% -1.3%

7:30 am Durable Goods (Ex-Trans) – May +0.7% +0.7% +1.0%

6-25 / 7:30 am Personal Income – May -2.6% -2.7% -13.1%

7:30 am Personal Spending – May +0.4% +0.2% +0.5%

9:00 am U. Mich Consumer Sentiment- Jun 86.5 86.4 86.4

Taper Tantrum Two?

June 15, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

June 14, 2021

To drive home his commitment to easy monetary policy and low interest rates in mid-2020, Federal Reserve Chairman Jerome Powell declared the Fed was not even “thinking about thinking about raising rates.”

The Fed meets again later this week and, very likely, is still not thinking about thinking about raising rates. But that’s only part of the Fed’s tool kit. Bond purchases are another, and have been running at a pace of $120 billion per month ($80 billion in Treasuries and $40 billion in mortgages). With inflation up, and the economy growing, the Fed is most certainly thinking about how to “taper” this bond buying.

As a result, some investors are worried about the impact on financial markets. Back in 2013, when Fed Chairman Ben Bernanke hinted that the Fed would slow the pace of quantitative easing, the 10-year Treasury yield jumped from roughly 1.7% to 3.0%, while the stock market hit an air-pocket. This rough patch for markets was famously dubbed the “Taper Tantrum.”

That financial turbulence was enough to put Bernanke and the Fed back on its heels, and they ended up postponing actual tapering until the beginning of 2014.

So, what happens this time? It’s true that monetary stimulus has been a key part of the current recovery from pandemic shutdowns. However, with so much liquidity in the financial system, we are skeptical that a policy shift toward tapering would create the same kind of market response for a few reasons.

First, the bond market has experience with tapering. When tapering finally ended in October 2014, bond yields were back down to about 2.3%. In other words, the tumult in markets was temporary. Eventually, the Fed didn’t just taper, it shrunk its balance sheet, which bottomed in August 2019 when the 10-year yield was back down to about 1.6%. So, after all the fear about tapering, yields eventually fell back to where they were before Bernanke even talked about tapering in the first place.

Second, the US is awash in monetary liquidity, and will remain so through any tapering and well beyond. That’s why the Fed is currently conducting massive reverse repo operations. There is so much cash that the financial system is perfectly willing to park it at the Fed…which, if you think about it, is a kind of self-tapering. The money is just not necessary for economic growth.

Third, the need for Fed bond buying to finance government spending is waning. President Biden originally asked for close to $4.3 trillion in extra spending for the next ten years, but Congress has balked. The White House might have to settle for as little as $1 trillion, maybe even less, depending on negotiations with Congress. Moreover, part of the spending package may come from money re-purposed from prior spending bills. No wonder bond yields fell last week even while consumer prices rose rapidly.

Last, it’s important to keep in mind that back in 2013, many, many investors were worried about a double dip recession. As a result, when the Fed said growth was strong enough to taper, higher bond yields were a sensible response.

Today, investors see rising growth due to reopening and higher inflation because of easy money. This is not 2013, when consumer prices were up only 1.7% in June versus the prior year. Now, when a taper is announced it’ll be the Fed signaling it’s getting slightly more serious about inflation.

A taper at this point, is NOT tightening. As a result, yields should be higher a year from now, but a tantrum-like surge is unlikely.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

6-15 / 7:30 am Retail Sales – May -0.6% -0.8% 0.0%

7:30 am Retail Sales Ex-Auto – May +0.4% +0.6% -0.8%

7:30 am PPI – May +0.5% +0.6% +0.6%

7:30 am “Core” PPI – May +0.5% +0.4% +0.7%

7:30 am Empire State Mfg Survey – Jun 22.0 21.5 24.3

8:15 am Industrial Production – May +0.6% +0.6% +0.5%

8:15 am Capacity Utilization – May 75.1% 75.0% 74.6%

9:00 am Business Inventories – Apr -0.1% -0.1% +0.3%

6-16 / 7:30 am Housing Starts – May 1.640 Mil 1.645 Mil 1.569 Mil

7:30 am Import Prices – May +0.8% +0.3% +0.7%

7:30 am Export Prices – May +0.8% +0.2% +0.8%

6-17 / 7:30 am Initial Claims – Jun 12 360K 370K 376K

7:30 am Philly Fed Survey – Jun 31.0 38.7 31.5

There's Nothing Normal About This Recovery

June 7, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

June 7, 2021

We keep hearing people make comparisons between this recovery and those of the past as if it’s apples-to-apples. For example, comparing job growth today to job growth after the 2008-2009 Panic. All in an effort to make the case that government spending creates economic growth.

But there is nothing normal about the current economy. The things our government leaders have done in the past year are unprecedented. As a result, using normal economic words and phrases to explain things makes no sense – these things have never happened before.

Normal economic downturns are called “recessions.” Growth phases are called “recoveries.” And the combination of these ups and downs a “business cycle.”

This has not been a normal business cycle. The contraction in the economy last year was not a normal recession, and the return of growth in the past year has not been a normal recovery. Comparing to the economic recoveries after the Panic of 2008, or Volcker’s tight money of the early 1980s, makes little sense. In fact, trying to compare the current rebound to historical events minimizes the pain that COVID-related and government mandated economic shutdowns have caused.

At the same time, giving credit to government spending for creating the current “recovery” is simply not true. Yes, when government borrows money from the Fed (which the Fed creates out of thin air) – or borrows money from future taxpayers – and gives that money directly to people, spending goes up. But that is not a real (or sustainable) recovery. To use the Fed’s favorite term, it’s transitory.

Countries across the globe shut down major parts of their economies and kept people from working. This caused major economic disruptions with supply chains, and put businesses and services that weren’t labeled “essential” under undue stress. Not to mention the displacement of tens of millions of workers.

Governments tried to cover up the (often self-inflicted) pain with money printing and borrowing. It’s like giving morphine to someone injured in a car accident. It masks the pain but doesn’t mend the injuries.

The divergence of economic data shows this clearly. The US is still 7.6 million jobs short of where it was in February 2020. Yet, retail sales, which fell 20% during the year-ended April 2020, rose 51.2% since then, more than fully recovering! In the past 24 months, total retail sales are up 10% per year, on average, versus a 3.6% growth rate from 2014-2019. The only way this is possible is having the government borrow, print, and distribute money for people to spend today.

It's true that reopening the economy from COVID shutdowns is providing a boost to economic activity. But this is just part of the story. We can’t start up the economy like a car engine. Supply chains are damaged. Many small businesses have been crushed.

As a result, trying to compare today’s economy to history is futile. Never before in history has the US government been so profligate in spending money it doesn’t have. And any growth in spending this has caused is certainly not “proof” that government stimulus creates wealth. It creates spending, yes, but it does not heal.

In 1914, Henry Ford decided to pay his workers $5 a day to prevent turnover, but also so his employees could afford to buy the cars they were making. Here we are in 2021, and the government is paying people not to work, so they can buy things they didn’t produce. No wonder there are shortages. But, more importantly, it’s the difference between supply-side and demand-side economics. Supply-side economics says that supply (Ford’s production plus all the other production in the economy) creates its own demand (the wages and incomes to buy that production).

All of this brings us back to where we are today. It’s true that spending is up. It’s true that the economy is expanding. Part of this is because the economy is opening up, and part of it is because the government is borrowing money from future production to spend today.

Without fully opening up, there can be no comparisons to previous recoveries. And using the past year to argue that government spending works misunderstands where real wealth comes from.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

6-7 / 2:00 pm Consumer Credit – Apr $20.5 Bil $20.0 Bil $25.8 Bil

6-8 / 7:30 am Int’l Trade Balance – Apr -$68.5 Bil -$69.1 Bil -$74.4 Bil

6-10 / 7:30 am Initial Claims – June 5 370K 380K 385K

7:30 am CPI – May +0.4% +0.4% +0.8%

7:30 am “Core” CPI – May +0.4% +0.4% +0.9%

6-11 / 9:00 am U. Mich Consumer Sentiment- Jun 84.2 84.5 82.9

May Market Review

June 2, 2021 Tyler Goodrich

Dear Friends and Clients,

May’s equity markets continued the upward trend, though less exuberantly than in prior months. Driving market indecision were the three I’s: immunity, inflation and infrastructure, says Raymond James Chief Investment Officer Larry Adam. The push and pull of backward-looking economic data combined with forward-looking projections led to some volatility.

While vaccinations (immunity) are on pace and mask mandates are loosening, questions remain about the efficacy against variants, the potential need for booster shots, and what may happen when the weather begins to cool again. Inflation remains at the top of investors’ minds as the Consumer Price Index (CPI) climbed 4.2% year-over-year in April. The Federal Reserve views higher inflation as transitory, reflecting a rebound from the low inflation of a year ago and bottleneck pressures as the economy re-starts. In contrast to the previous era where the Fed would act pre-emptively, officials now want to see greater improvement in labor market conditions before raising short-term interest rates. However, if a further rise in inflation expectations is sustained, the Fed could tighten monetary policy sooner than expected. The outlook for economic growth remains strong, but labor market frictions are likely to be more intense than in a typical recovery.

Talks in D.C. around infrastructure – its definition and how to pay for it – remain at the forefront, although there’s no clarity yet as bipartisan negotiations remain deadlocked. A summer of debate increases the likelihood of a deal by fall, thought to be in the $2-$3 trillion range with pared-back adjustments to corporate and capital gains rates, suggests Washington Policy Analyst Ed Mills.

Let’s review where we are so far this year:

Economy ramping up

April’s rise in CPI reflects a rebound in prices that were repressed during last year’s lockdowns and restart pressures, which should fade in a few months. Supply chain bottlenecks and materials shortages are expected during economic recovery. They are more intense than usual now given the speed of economic recovery, spurred by fiscal stimulus and the rapid distribution of vaccines, according to Chief Economist Scott Brown. Supply chains should improve over time, but current issues may not be resolved quickly and could add to inflation expectations.

Overseas

Strong improvement in management of the COVID-19 crisis across Europe helped push equity indices up during the month, aided further by an appreciation of both the euro and the British pound. There is still region-wide anticipation of pan-European holidays this summer, which will help the region’s economy as 2021 progresses, explains European Strategist Chris Bailey. The Chinese yuan rose to a three-year-high against the dollar during May. China’s stock market rose to levels last seen in March, although many other markets in Asia and the emerging markets struggled during the month.

On bonds

Treasury yields remained range-bound, as they have for the past several months; the overall trend was a move slightly lower, although within a fairly tight range. Intermediate and longer-term corporate bonds sat on the steepest part of the yield curve, offering investors incremental yield for longer duration. Longer maturities (in the 6-to-15-year range) among municipals also seem to offer better value.

The bottom line

The economic recovery remains robust, with added momentum from fiscal and monetary support. Rising inflation and volatility remain concerns, however the positives outweigh the potential negatives, according to Joey Madere, senior portfolio analyst of Equity Portfolio & Technical Strategy.

As mentioned last month, pullbacks and volatility are to be expected in the normal course of investing, especially during times of economic recovery. Those ready to put cash to work may want to consider any weakness as an opportunity to thoughtfully add to strategic positions in areas exposed to recovery efforts.

As always, I send warm thoughts to you and yours. Thank you for your continued confidence in me. I’ll be sure to keep my eyes on the markets and relate anything of relevance. If you have any questions, please reach out at your convenience.

Sincerely,

Matt Goodrich, Financial Advisor

President, Goodrich & Associates, LLC

Branch Manager, RJFS

Material prepared by Raymond James for use by its advisors.

Inflation Revisionism

June 2, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

June 1, 2021

Talk about revisionist history! A recent tweetstorm from an opinion leader at the NY Times says that, looking back, he wonders what all the fuss was about inflation in the 1970s. It wasn’t “that high,” he says, and so the risk of returning to that kind of inflation should not be a serious concern today, because it wouldn’t even be that bad if we went back there.

Just so we get our facts straight, here are the consumer price inflation rates per decade looking backward. The 1950s - 2.2%, 1960s – 2.5%, 1970s -7.4%, 1980s – 5.1%, 1990s – 2.9%, 2000s – 2.6% and 2010s – 1.7%. So, while the US in the 1970s and early 1980s was not Zimbabwe, it was the worst sustained inflation in US history. Prices were doubling every 10 years and the Fed had to push interest rates up to 20% to stop the damage.

Nonetheless, the “revisionists” say that the inflation of the 1970s was good for many people. They argue that home ownership rose, student debt got wiped out, and inflation reduced the value of the national debt. In other words, if you can see these benefits, why don’t we do it again?

First, it is true that home ownership rose in the 1970s, but it was rising even faster in the second half of the 1960s. Moreover, Savings & Loans provided assumable mortgages in the 1970s, which allowed buyers to assume a lower, pre-inflation mortgage rate. Eventually, this led to the collapse of the Savings & Loan Industry.

Second, because student debt has fixed interest rates, of course it would disappear faster with higher inflation. In addition, people with student debt tend to have higher lifetime incomes than people without that debt. Is he really arguing in favor of using inflation to redistribute wealth to people with above-average lifetime incomes?

Third, the national debt did fall as a share of GDP after World War II. But almost all of the decline happened between 1946, when debt was 118% of GDP, and 1969 when it fell to 36%. It only fell by another 4 percentage points of GDP, to 32%, by 1981. And from 1946 through 1969, inflation averaged 2.5% per year. In other words, the inflation of the 1970s was not the key behind reducing the national debt.

The primary problem, with 1970s-style inflation is that everyone involved in the economy – every business owner, every worker, every investor, every manager, every entrepreneur – would have to spend time trying to forecast it. Borrowing and investing would pose danger on both sides of the transaction. The same goes for labor contracts.

Here’s what the 1970s-inflation apologists don’t say: unemployment averaged 4.6% in the 1950s and 1960s then averaged 6.2% in the 1970s. It was even higher in the 1980s, but that’s because the early part of the decade had to be dedicated to a tight monetary policy to wrestle inflation under control.

Ultimately, inflation is a “hidden” tax that doesn’t stay hidden. People adapt by redirecting resources away from production and toward inflation-hedging, which doesn’t raise standards of living over time.

The problem is, at this point, you have to be relatively old to remember the 1970s. With each passing year, a smaller share of the population actually lived through it. And so we forget the pain it caused. Hopefully, we are not condemned to repeat it.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

6-1 / 9:00 am ISM Index – May 61.0 60.9 61.2 60.7

9:00 am Construction Spending – Apr +0.5% +0.2% +0.2%

6-2 / afternoon Total Car/Truck Sales – May 17.4 Mil 16.6 Mil 18.5 Mil

afternoon Domestic Car/Truck Sales – May 10.3 Mil 12.6 Mil 13.9 Mil

6-3 / 7:30 am Initial Claims – May 29 388K 400K 406K

7:30 am Q1 Non-Farm Productivity +5.5% +6.2% +5.4%

7:30 am Q1 Unit Labor Costs -0.4% +2.1% -0.3%

9:00 am ISM Non Mfg Index – May 63.0 63.3 62.7

6-4 / 7:30 am Non-Farm Payrolls – May 653K 667K 266K

7:30 am Private Payrolls – May 600K 600K 218K

7:30 am Manufacturing Payrolls – May 21K 15K -18K

7:30 am Unemployment Rate – May 5.9% 5.9% 6.1%

7:30 am Average Hourly Earnings – May +0.2% +0.3% +0.7%

7:30 am Average Weekly Hours – May 34.9 34.9 35.0

9:00 am Factory Orders - Apr -0.3% -0.1% +1.1%

Cryptocurrency Primer

May 28, 2021 Tyler Goodrich

A quick guide on cryptocurrency application and risks.

WHAT ARE CRYPTOCURRENCIES?

Cryptocurrencies represent digital units that are utilized to facilitate online transactions without the need for a central intermediary to process. The transactions are digitally recorded on a public ledger. As of May 2021, per CoinMarketCap, more than 10,000 cryptocurrencies, also known as coins, have been launched as there are minimal barriers to launching new coins. While almost all cryptocurrencies have no intrinsic value, the two most popular cryptocurrencies, Bitcoin and Ether, have a combined market value of over $1 trillion.*

WHAT IS BITCOIN?

Bitcoin, launched in 2009, is the most widely known cryptocurrency and its market capitalization surpasses that of all other cryptocurrencies. Additionally, Bitcoin’s invention coincided with that of the blockchain (described later), which was required to facilitate transactions. The supply of Bitcoin is finite (currently capped at 21 million coins) and designed to become increasingly constrained over time.

WHAT IS ETHEREUM?

Ethereum is the most frequently used open source blockchain network (described later). The primary use case for Ethereum is the built-in functionality to create so-called “smart” contracts that can be executed without an intermediary. A simple example is a life insurance “smart” contract. When someone with a life insurance policy passes away, the notarized death certificate would be the input trigger for the contract to release the payment to the named beneficiaries. Ether, which is currently the second largest cryptocurrency by market capitalization, is the native cryptocurrency built into the Ethereum network. Ether is the cryptocurrency that is utilized to facilitate Ethereum smart contracts.

HOW DO CRYPTOCURRENCIES COMPARE TO TRADITIONAL CURRENCIES OR INVESTMENTS?

Unlike traditional, government-issued currencies, cryptocurrencies are not sponsored by a government authority, are largely unregulated and confer no claims against any assets. Moreover, due to price volatility and transaction costs, cryptocurrencies are rarely used to conduct typical financial transactions. Consequently, cryptocurrencies are not widely accepted mediums of exchange despite the small number of companies that accept them as forms of payment.

Given the lack of utility as payment mechanisms, the majority of the interest in cryptocurrencies has been for their use as speculative investment vehicles, largely based on the perception that their value will increase due to codified supply limitations and/or excitement regarding the potential application of blockchain technology.

WHAT IS BLOCKCHAIN TECHNOLOGY?

Blockchain is the technology that underpins cryptocurrencies, but its application is not limited to just cryptocurrencies. A blockchain is a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Once a transaction is agreed upon between users, the majority of computers in the network must verify that the transaction is valid before the transaction can be added to the digital ledger. Blockchain technology is designed to operate without the need for a central authority or clearinghouse. Additionally, the records that are created are irreversible and, therefore, cannot be duplicated or changed.

As its name suggests, blockchain can be described as blocks of information that are pieced together with digital signatures to form a chain of encrypted records. Beyond facilitating cryptocurrency speculation, the commercial application of blockchain technology can span a number of industries. For example, the blockchain can be utilized in supply chain management for tracking inventory and improving logistics.

HOW DO YOU BUY AND SELL CRYPTOCURRENCIES?

The buying and selling of cryptocurrencies is different than the buying and selling of more conventional instruments such as stocks or bonds. Many cryptocurrencies are bought and sold directly on cryptocurrency exchanges without an intermediary. There is no overarching best execution requirement and, in fact, cryptocurrencies often trade simultaneously at different prices on different exchanges. Cryptocurrency transactions can also involve noteworthy fees. Cryptocurrencies are stored in digital wallets that can either be connected or disconnected from the internet. While internet-connected (hot) wallets can offer a convenient way to access cryptocurrencies, they are subject to cybersecurity risks. Unlike traditional stock exchanges, most cryptocurrency exchanges also act as custodians.

WHAT ARE THE BENEFITS AND CONSIDERATIONS OF TRANSACTING WITH CRYPTOCURRENCIES?

The major benefit of transacting with cryptocurrencies is the use of a decentralized platform, which enables cross-border transactions and the ability to transact 24 hours a day, seven days a week. In some cases, cryptocurrencies can offer a certain degree of anonymity but, given that each transaction is recorded on a blockchain, such anonymity is limited. It is important to note that the infrastructure and business adoption to support these transactions is still in the early stages. From an investment perspective, the primary benefit to cryptocurrencies is that, as the market developed, there has been an increase in the value of many cryptocurrencies. However, going forward, there may not be a correlation between increased blockchain adoption and the market value of cryptocurrencies.

WHAT ARE THE BIGGEST RISKS ASSOCIATED WITH SPECULATING IN CRYPTOCURRENCIES?

Many cryptocurrencies do not have any intrinsic economic value nor do they generate cash flows such as interest payments or dividends. Currently, the primary rationale for investing in cryptocurrencies is speculation that the market for cryptocurrencies will grow and that prices will rise. Additional risks include, but are not limited to:

• Absence of regulatory oversight or investor protections – Cryptocurrencies are not regulated by any government agency or central bank.

• Cybersecurity risk – Cryptocurrencies are bought, sold and stored online, which makes all parties in the cryptocurrency value chain vulnerable to cyberattacks and breaches.

• Custody and clearing – Many of the custody and clearing standards used to trade securities have not been implemented by cryptocurrency exchanges.

• Concentrated ownership – A large number of cryptocurrencies are controlled by early adopters who are unlikely to sell, which contributes to price volatility.

CAN I BUY CRYPTOCURRENCIES AT RAYMOND JAMES?

At this time, Raymond James does not offer the ability to buy or sell cryptocurrencies. However, we continue to monitor the maturity of the space and the potential risks and benefits to investors.

Prior to making an investment decision, please consult with your financial advisor about your individual situation. The prominent underlying risk of using Bitcoin as a medium of exchange is that it is not authorized or regulated by any central bank. Bitcoin issuers are not registered with the SEC, and the Bitcoin marketplace is currently unregulated. Bitcoin and other cryptocurrencies are very speculative investments and involve a high degree of risk. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment, and a potential total loss of their investment. Securities that have been classified as Bitcoin-related cannot be purchased or deposited in Raymond James client accounts REGULATORY BACKGROUND | Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission (“SEC”) have issued multiple warnings to investors regarding the risks associated with Bitcoin and other cryptocurrency. New products and/or technology, such as Bitcoin and other cryptocurrency, are typically considered high-risk investment opportunities as they commonly are targeted by fraudsters who manipulate the market with artificial promotional scams. As of January 2021, the SEC is currently reviewing more than 10 applications and has rejected multiple applications from fund companies seeking to create and list a cryptocurrency Exchange Traded Product (“ETP”) due to the highly unregulated nature of the cryptocurrency marketplace. The biggest risk factors surrounding Bitcoin (and other cryptocurrency) issuers include that they are not registered with the SEC (or local country regulator) and can be exploited by criminals for money laundering/terrorist financing making the source of funds difficult to follow and verify. RJF CRYPTOCURRENCY SECURITY DEFINITION | Approved cryptocurrency-related securities are defined as any security that is associated with a company and/ or issuer that is:

1. Affiliated with a U.S. federally regulated cryptocurrency business operation;

2. Listed on a U.S.-recognized exchange (e.g., NYSE or Nasdaq); and

3. Subject to RJF Securities Review Group (SRG) approval.

Prohibited cryptocurrency-related securities are defined as any security that is associated with a company and/or issuer that is affiliated with one or more of, but not limited to, the following non-U.S. federally regulated cryptocurrency business objectives:

1. Indexed to the underlying price movement of a cryptocurrency;

2. Cryptocurrency mining;

3. Cryptocurrency escrow services; and/or

4. Cryptocurrency exchange or payment services.

A Question for the Fed

May 25, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

May 24, 2021

It’s not a surprise. Inflation is running hot. But, is it transitory and temporary, or is it real and here for the longer term. How hot will the Federal Reserve let it run, and for how long? When does transitory and cyclical become “secular” and “serious”? These are important questions and only the Fed has the answers.

In April, the consumer price index was up 4.2% from a year ago; producer prices were up 6.2%. The “core” measures for each of these indexes are running at 3.0% and 4.6%, respectively. The Federal Reserve focuses on the inflation measure for personal consumption expenditures (PCE), which should be up about 3.4% versus a year ago once we get the April data, which is scheduled to arrive this Friday.

The Fed has said it thinks the inflation surge, at least when looked at on a year-over-year basis, is overstated because it is built on comparisons to a period when prices were falling during the onset of the COVID-19 crisis. They also think any recent pressures are “transitory,” caused by supply-chain issues that should go away as the economy continues to recover.

Meanwhile, it has discounted extremely rapid growth in the M2 measure of the money supply. Because central banks around the world have introduced Quantitative Easing in the past decade, with no pick-up in inflation, the Fed thinks any link between money and prices has been broken…Jerome Powell even said we should “unlearn” this idea that money growth causes inflation.

Clearly, the Fed is dismissing the surge in inflation this year. And Fed forecasts show that it expects inflation to fall back down to it’s 2.0% target in 2022 and beyond.

But back in mid-March, the last time the Fed released an economic forecast, it projected PCE inflation of 2.4% this year. We estimate a 0.5% increase for the month of April and, if we’re right, we could easily end up getting PCE inflation of 3.0% or more for 2021, well above the Fed’s forecast.

So, what we would like to know from the Fed is whether 2021 inflation matters at all. What if PCE inflation for 2021 ends up at 3.5% rather than 2.4%? How about 4.5%? Does the intensity of this year’s inflation carry any weight?

Maybe the Fed should say directly or at least signal cryptically (or maybe just leak through its favorite journalists), that it is handing out a one-year dispensation for inflation in 2021. Inflation can skip curfew and stay out to all hours, eat meat on Fridays, party like it’s 1999, pretty much do whatever it wants through the stroke of midnight on New Year’s Eve, but then has to get back into 2.0% compliance in 2022. And, if inflation behaves like that…gets back to its 2% target next year, then all is forgiven.

We would love the Fed to be right about this. But this is not the first time in history the Fed has dismissed an increase in inflation as temporary or unworthy of serious policy attention. The Fed sat back and watched as inflation crept upward in the 1960s and 1970s. They blamed OPEC, the value of the dollar, and a stream of one-off events for temporarily lifting prices. The Fed also thought that persistent unemployment needed to be fixed with more money printing.

The problem is that a lot of inflation always starts with a little bit of inflation. And once the Fed gets into the habit of blaming it on “transitory” events, it runs the risk of becoming more of a long-term issue.

The Fed will next release a policy statement on June 16, followed by the usual press conference. We think it’s time to let everyone know how high inflation can go, and for how long, before the Fed would adjust its policies.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

5-25 / 9:00 am New Home Sales – Apr 0.950 Mil 0.955 Mil 1.021 Mil

5-27 / 7:30 am Initial Claims May 22 425K 432K 444K

7:30 am Q1 GDP Preliminary Report 6.5% 6.5% 6.4%

7:30 am Q1 GDP Chain Price Index 4.1% 4.1% 4.1%

7:30 am Durable Goods – Apr +0.8% +1.4% +0.8%

7:30 am Durable Goods (Ex-Trans) – Apr +0.8% 0.2% +1.9%

5-28 /7:30 am Personal Income – Apr -14.3% -14.3% +21.1%

7:30 am Personal Spending – Apr +0.5% +0.3% +4.2

8:45 am Chicago PMI 68.0 68.0 72.1

9:00 am U. Mich Consumer Sentiment- May 83.0 83.0 82.8

Unsustainable

May 18, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

May 17, 2021

The US economy is recovering rapidly from the COVID-19 disaster. The rollout of vaccines, the lifting of restrictions, loose monetary policy, and a massive increase in government spending are all playing their parts.

The problem is that the massive government “stimulus” checks have put the economy in a strange position, where retail sales are far above where they would be if COVID had never happened, even as the production side of the economy remains relatively weak.

Friday’s report on the retail sector showed that retail sales were unchanged in April, remaining at essentially the same lofty level they were in March. However, the lack of an increase in April shouldn’t have been much of a surprise. Even with no increase in April, retail sales were 17.9% higher than they were in February 2020, pre-COVID. To put this in perspective, that’s the fastest gain for any 14- month period since 1978-79. A key difference? That period in 1978-79 had double-digit inflation, versus the 3.1% increase in consumer prices since February 2020.

Another way to think about how high retail sales have been lately is that if COVID had never happened and sales since February 2020 had increased at a more normal 4.5% per year pace, it would have taken until November 2023 for retail sales to reach where they were in March and April this year. In other words, sales have arrived at the recent level about two and half years ahead of schedule.

This means that growth in retail sales will face a headwind over the next few years as the extraordinary recent bouts of “stimulus” peter out, roughly offsetting the benefits of more jobs and higher wages.

Meanwhile, even though retail sales have surged to abnormal highs, the production side of the economy is still operating below pre-COVID levels and even further below where production would be today if COVID had never happened. Manufacturing production is down 2.7% versus February 2020. Part of this is damaged supply chains. The demand for new cars and trucks has rarely been higher. Retail spending at auto and motor vehicle dealerships was 33.1% higher in April than in February 2020.

And yet motor vehicle production (excluding parts) is down 18.1% versus February 2020, largely due to a shortage of semiconductor chips. But it’s not only autos. Manufacturing excluding autos is down 0.9% versus February 2020.

In spite of the hopes of some policymakers, the economy doesn’t work like a light switch. It’s not just sitting there waiting for some public officials to turn it on, returning it to pre-COVID normal operation. Many businesses have disappeared, never to return, and many of them had a huge store of operational and knowledge capital built into them, know-how about the best way to get certain things done, that capital having been developed over decades.

The divergence between consumer spending and actual production is a manifestation of inflationary economic policies, which also showed up in last week’s reports. Consumer prices are up 4.2% from a year ago while producer prices are up 6.2%. That’s what you get when people are spending more dollars provided by short-term oriented government policies, not the return for the production of actual goods and services.

But, ultimately, there is no free lunch. All extra government spending today must be paid for by reduced spending by others, today or in the future. Yes, in theory, there are some “good” infrastructure projects out there that could help the overall economy. But the monies for those projects could easily come out of other government spending commitments; they shouldn’t add to the deficit or require higher taxes, which themselves will tend to dampen future economic growth further.

For now, there are plenty of reasons to remain bullish. Opening up is the best stimulus and the economy still has long way to go to get fully open. Look for further gains in production in the year ahead, even as policymakers in Washington adopt some policies that hurt us in the long run.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

5-17 / 7:30 am Empire State Mfg Survey – May 23.8 20.0 26.3

5-18 / 7:30 am Housing Starts – Apr 1.703 Mil 1.705 Mil 1.739 Mil

5-20 / 7:30 am Initial Claims May 15 460K 493K 473K

7:30 am Philly Fed Survey – May 41.9 47.1 50.2

5-21 / 9:00 am Existing Home Sales – Apr 6.090 Mil 5.910 Mil 6.010 Mil

Biden and Powell Versus Summers and Dudley

May 11, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

My 10, 2021

One of the best economic debates that’s happening right now isn’t between Republicans and Democrats or liberals versus conservatives, it’s between policymakers who want to go full steam ahead with as much fiscal and monetary “stimulus” as possible and center-left economists who worry about the economic effects of over-stimulating the economy.

In one corner we have President Joe Biden and Fed Chief Jerome Powell. Biden signed a $1.9 trillion stimulus bill back in March and is asking for more than $4 trillion in additional measures. Powell has the Federal Reserve setting short-term interest rates at essentially zero and buying $120 billion per month in Treasury and mortgage-related securities. Moreover, the Fed is committed to keeping these policies in place for the foreseeable future. As far as Biden and Powell are concerned, any problems that might arise from overstimulating the economy can be dealt with when and if the economy shows clear signs of overstimulation.

In the other corner we have Larry Summers and William Dudley, both center-left economists. Summers was Treasury Secretary under President Clinton and ran the National Economic Council under President Obama; Dudley was the chief economist for Goldman Sachs and ran the New York Federal Reserve Bank from 2009 to 2018. Supply-siders, conservatives, or Republicans, these are not.

Summers has called Biden’s efforts the “least responsible” macroeconomic policy in forty years (by which he means the least responsible since President Reagan’s) and has argued the amount of extra spending is far in excess of what’s needed to get the economy back to where it would have been in the absence of COVID-19. “If your bathtub isn’t full, you should turn the faucet on, but that doesn’t mean you should turn it on as hard as you can and as long as you can,” Summers said earlier this year on National Public Radio.

In turn, Summers is concerned the extra spending will generate too much inflation, the Fed will have to address the increase in inflation by tightening monetary policy earlier than it would otherwise want to, and when the Fed tightens monetary policy to address inflation, it usually ends badly for the US economy.

Summers sees only a one-in-three chance of robust growth without inflation for the US, with the other two-thirds split between two different negative scenarios: (1) stagflation or (2) the Fed applying the brakes so hard it tips the economy into a recession.

Meanwhile, William Dudley has also issued warnings, saying that he thinks the Fed is putting itself in a position where when it eventually starts to raise rates, it’s going to have to do so aggressively. If the Fed is too slow to tighten, says Dudley, it will have to eventually “catch up,” and that caching up will not be “pleasant” for financial markets. A 10-year Treasury Note yield of 4.0% would be possible in this scenario, says Dudley.

What’s notable about Summers and Dudley is not only their center-left pedigrees but also that neither is likely to pursue a position in the Biden Administration, which means they have no reason to “spin” their views to get an important appointment. As such, they can say what they think, without fear of losing out on an offer of a political job.

The bottom line is that politics doesn’t make good economics. No one knows for sure where these unprecedented policies are going to take us. However, at least Summers and Dudley are thinking about how risky this riverboat gamble might be.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

5-12 / 7:30 am CPI – Apr +0.2% +0.2% +0.6%

7:30 am “Core” CPI – Apr +0.3% +0.2% +0.3%

5-13 / 7:30 am Initial Claims – May 9 500K 520K 498K

7:30 am PPI – Apr +0.3% +0.3% +1.0%

7:30 am “Core” PPI – Apr +0.4% +0.4% +0.7%

5-14 / 7:30 am Import Prices – Apr +0.6% +0.2% +1.2%

7:30 am Export Prices – Apr +0.6% +0.1% +2.1%

7:30 am Retail Sales – Apr +1.0% +1.3% +9.8%

7:30 am Retail Sales Ex-Auto – Apr +0.8% +0.8% +8.4%

8:15 am Industrial Production – Apr +1.2% +2.2% +1.4%

8:15 am Capacity Utilization – Apr 75.3% 76.0% 74.4%

9:00 am Business Inventories – Mar +0.3% +0.3% +0.5%

9:00 am U. Mich Consumer Sentiment- May 90.0 90.0 88.3

Be Prepared for Tax-Related Scams During Tax Season

May 10, 2021 Tyler Goodrich

Learn how to avoid common scams that can be prevalent during tax season.

Tax-related scams have become increasingly common. And with the tax deadline extended again this year, they can be something that can occur year-round. Fraudsters will contact you pretending to be from the IRS or other tax-related agency. You could receive fake emails, phone calls, letters or other forms of communications.

Be on high alert for phishing emails, attempting to steal information like tax IDs, account information, passwords and other valuable data. Be immediately suspicious of any unsolicited communication that asks for your Social Security number, login credentials or other personal information.

FAQs

Q. Will the IRS contact me via email?

A. The IRS will never initiate contact with you via email, text messages or social media with a request for personal or financidal data. Be extremely careful with any unsolicited email that claims to be from the IRS.

Q. What should I do if I receive an email or text message claiming to be from the IRS or another tax service that asks for sensitive information?

A. Do not reply. Do not click on any links or download any attachments. If it comes to your RJ email address, forward the email to cyberthreat@raymondjames.com and then delete the original message without responding. You can also forward any IRS-related emails received on your personal email to phishing@irs.gov.

Q. What should I do if I discover a website claiming to be the IRS that I suspect is not legitimate?

A. Do not click any links, download any files or submit any information. Send the URL to phishing@irs.gov.

Q. Are there any trusted resources I can use to identify email scams or websites claiming to be the IRS?

A. The IRS website highlights examples of email scams and bogus websites. Find this information online at www.irs.gov/uac/report-phishing.

Q. What should I do if I receive an unsolicited phone call or letter claiming to be from the IRS that I suspect may not be legitimate?

A. Contact the IRS yourself to confirm any requests made via phone or letter, particularly those that are threatening or demand immediate payment. Visit www.irs.gov/uac/report-phishing for phone numbers and other tips.

Q. If I receive a suspicious tax-related email while at work, should I notify Raymond James?

A. Yes, forward the email to cyberthreat@raymondjames.com to help determine if the message is legitimate.

Q. How can I safely send sensitive information when necessary?

A. There may be some scenarios where it’s necessary to send sensitive documents to others, like your accountant. First verify that the person requesting the information is legitimate (i.e. official phone number). Then make sure your emails are encrypted – if sharing through your RJ email, type [protect] in the subject line; if sharing through your personal email, you can reference this resource.

April Equity Markets Retain Spring in Their Step

May 5, 2021 Tyler Goodrich

May 4, 2021

April Market Review

Dear Friends and Clients,

The markets continue their upward trend, supported by accommodative fiscal policy from the Federal Reserve, strong gross domestic product (GDP) numbers and solid earnings reports.

As President Biden celebrated his 100th day in office to close the month, the traditional favorable equity market performance during the so-called “honeymoon” phase continued, with the S&P 500 rallying about 10% over that time frame. The S&P 500 ended April up 5.24%, its third consecutive positive monthly gain. The Dow Jones and NASDAQ reached new highs as well.

Driving the equity market higher is the rapid distribution of over 235 million vaccines, the best economic growth (+6.4% annualized) since 2003, and a dramatic, better-than-expected surge in corporate earnings – the highest (+36%) since 2010, explains Raymond James Chief Investment Officer Larry Adam. As the presidential “honeymoon” period ends, debates over government spending, taxes, inflation and Fed tapering are likely to lead to increased volatility.

The advance estimate of first quarter GDP came in at a 6.4% annual rate, but Raymond James Chief Economist Scott Brown notes that the headline figure understates the economy’s strength. Consumer spending on durable goods rose sharply, fueled by stimulus checks, and spending on services should pick up as the economy reopens.

In Washington, infrastructure and tax proposals remain just that – proposals. Congress is drafting legislation, and Raymond James Washington Policy Analyst Ed Mills expects to see broad compromise in order to secure the necessary votes. Generally speaking, Mills believes we can expect a significant amount of additional federal spending later this year tied to revenue-raising measures. The compromises necessary for passage may create a near-term Goldilocks scenario for the market in terms of further economic stimulus.

Let’s review where we are so far this year:

Yield, interest rates and inflation

With interest rates remaining low despite positive economic reports, demand for yield is rising across all bond maturities. Investors are keeping a wary eye on inflation, as are the members of the Federal Open Market Committee. Long-term inflation expectations, which have remained close to the Federal Reserve’s 2% long-term goal, are key. Should those long-term inflation expectations rise significantly, then actual inflation would trend higher, Brown notes. However, the Federal Reserve, which wants inflation to be moderately higher in the near term, has the tools to bring inflation back down. Fed Chair Powell has signaled that monetary policy will remain accommodative until employment and inflation are closer to the central bank’s goals.

Overseas

Once again, U.K. and European markets generated modest gains for the month, lifted by positive earnings reports and optimism for economic recovery as more and more vaccines get distributed. However, in Asia, market performance was decidedly mixed. Singapore and Hong Kong made plans to broaden travel opportunities; on the other hand, Japan (host of the Summer Olympics) implemented its first-ever lockdowns, and India’s COVID-19 cases rose to record levels, prompting large-scale economic disruption.

The bottom line

The vast majority of S&P 500 companies have surprised on the upside, beating their estimates by an average of 23.7%. Even with a relatively bullish outlook for domestic stocks, investors should expect normal pullbacks on occasion. Those ready to put cash to use can plan to use any weakness as an opportunity to strategically add positions at an individual stock and sector level. Lastly, remember to file your taxes before the extended deadline of May 17.

As always, I wish you and yours well. Thank you for your confidence in me. I’ll be sure to keep my eyes on the markets and relate anything of relevance. If you have any questions, please reach out at your convenience.

The financial markets and our office will be closed May 31 in observance of Memorial Day. As always, you can securely access your accounts through Raymond James Client Access – whenever, wherever. We will reopen on Tuesday.

Sincerely,

Matt Goodrich, Financial Advisor

President, Goodrich & Associates, LLC

Branch Manager, RJFS

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the authors and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges, which would reduce an investor’s returns. Small cap securities generally involve greater risks. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks. These risks may be greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation, and may not be suitable for all investors.

Material prepared by Raymond James for use by its advisors.

Resisting the Budget Blowout

May 4, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

May 3, 2021

President Biden and Congress agreed to a roughly $2 trillion stimulus back in March and are now contemplating two new additional multi-trillion dollar pieces of legislation, on both infrastructure and social spending, as well as some massive tax hikes. Ultimately, though, it’s extremely important to keep in mind that the legislative process surrounding these bills is going to be long and arduous and that it is going to be very difficult for the Biden Administration to get everything it wants.

One hurdle is obvious: Senator Joe Manchin, a Democrat from West Virginia, has said he will not vote to get rid of the Senate filibuster and wants new major pieces of legislation to be bipartisan. In the end, we think he holds the line on keeping the filibuster but probably capitulates to a president of his own party by supporting some extra spending on a party-line vote, maybe something around $2 trillion total rather than the $4 trillion-plus the Biden Administration is seeking.

But other Senate Democrats are going to have reason to resist big spending programs and higher taxes, as well, including relative moderates such as Mark Kelly and Krysten Sinema, both from Arizona, and John Tester, from Montana.

Then there is Senate Democratic Leader Chuck Schumer. Think about all the high-income earners in New York who support him, but don’t want higher capital gains or dividends taxes. We fully expect Schumer to vote for higher investment taxes; his party’s president is proposing these policies and he doesn’t want to give Rep. Alexandria Ocasio-Cortez an excuse to challenge him in the NY Senate primary in 2022. But, behind, the scenes, we are skeptical he will twist other Senators’ arms to get the votes for drastic tax hikes on investment.

Then there’s the House. When President Clinton passed a tax hike in 1993, the Democrats started out with a 258-176 majority, but ended up losing 40 Democrats and barely won the vote 218-216. If the Democrats had lost merely one more vote then the Clinton tax hike would have gone down in flames.

This time around the Democrats have a razor thin majority to start. Yes, when it comes to twisting arms, Speaker Pelosi has been like Hercules in the past, but everyone knows she will not run for Speaker again in 2022 and this is her last term holding the gavel. And with such a short remaining time in office it becomes harder to make good on her “backroom” political promises; she just doesn’t have much time to deliver.

Meanwhile, relatively moderate Democrats in swing districts know their party was eviscerated in the 1994 and 2010 mid-term cycles, after a combination of tax hikes and spending increases. Some of these moderates were first elected in the past couple of election cycles and want to have long careers in the House. They know, if they vote for current legislation as it stands, they better start circulating their resumes, as well.

The best bet now is that spending and taxes both go up, but not nearly as much as President Biden or the far-left has asked for. Hold onto your hats, it’s going to be a wild ride.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

5-3 / 9:00 am ISM Index – Apr 65.0 65.0 60.7 64.7

9:00 am Construction Spending – Mar +1.7% +1.1% +0.2% -0.8%

afternoon Total Car/Truck Sales – Apr 17.6 Mil 17.8 Mil 17.7 Mil

afternoon Domestic Car/Truck Sales – Apr 13.6 Mil 13.7 Mil 13.5 Mil

5-4 / 7:30 am Int’l Trade Balance – Mar -$74.3 Bil -$74.9 Bil -$71.1 Bil

9:00 am Factory Orders – Mar +1.3% +0.6% -0.6%

5-5 / 9:00 am ISM Non Mfg Index – Apr 64.1 64.0 63.7

5-6 / 7:30 am Initial Claims – May 2 540K 550K 553K

7:30 am Q1 Non-Farm Productivity +4.2% +3.8% -4.2%

7:30 am Q1 Unit Labor Costs -1.0% +0.9% +6.0%

5-7 / 7:30 am Non-Farm Payrolls – Apr 978K 990K 916K

7:30 am Private Payrolls – Apr 900K 900K 780K

7:30 am Manufacturing Payrolls – Apr 60K 60K 53K

7:30 am Unemployment Rate – Apr 5.7% 5.9% 6.0%

7:30 am Average Hourly Earnings – Apr 0.0% +0.2% -0.1%

7:30 am Average Weekly Hours – Apr 34.9 34.9 34.9

2:00 pm Consumer Credit – Mar $20.0 Bil $15.0 Bil $27.6 Bil

Protecting Your Social Security Payout

April 30, 2021 Tyler Goodrich

To handle payments for a disabled senior, it's not enough to put powers of attorney, medical directives or guardianship arrangements in place.

One in three seniors will die with dementia.1 It’s a sobering statistic, and when you consider it alongside increasing longevity, it’s easy to see why planning for the potential impact of diminished capacity on your or a loved one’s future finances is critical.

An estimated 6.2 million Americans age 65 and older are living with Alzheimer’s, and more than 11 million Americans are providing unpaid care for someone struggling with dementia.1 Numbers like these prove that planning for the possibility of long-term care and considering who will make decisions if you can’t isn’t simply smart, it’s necessary. And that planning now – before you have the need or are unable to share your wishes – is essential.

Protecting yourself

When it comes to handling Social Security payments for a disabled senior, establishing powers of attorney, medical directives or guardianship arrangements may not be enough. The Social Security Administration (SSA) requires a special designation known as representative payee.

A representative payee is someone who acts on behalf of another person who is incapable of representing themselves and is responsible for directing payouts exclusively to meet a beneficiary’s needs. The SSA may determine that an individual is incapable of managing or directing someone else to manage his or her benefits and would then appoint a representative payee. Family members may also consult the SSA if they believe their family member necessitates a representative payee. Generally, a family member or friend serves as representative payee. If friends or family are not able to serve as payees, the SSA will look for qualified organizations to be representative payees.

The SSA requires that all legally incompetent adults and most minor children (a disabled child or young adult entitled to Supplemental Security Income, for example) have a representative payee. In most cases, the person in this role cannot be paid for the work they do on behalf of the incapacitated person. And the SSA requires them to keep careful records.

A critical thing to keep in mind about the responsibilities of acting as a representative payee is that the permissions that accompany the role do not extend to other facets of your affairs. Making medical decisions or signing legal documents on your behalf will still require that someone be granted powers of attorney or guardianship.

Protecting a loved one

If you assume the role of representative payee, the SSA offers a range of resources via ssa.gov, including a series of training videos, a downloadable guide and a frequently asked questions page. The process will likely require a trip to a Social Security office and a completed SSA-11 form explaining why the beneficiary needs assistance and why they have selected you for the job. Recall, too, that this designation will be in addition to any other legal or medical role you might be playing for your loved one. It’s one piece of the larger whole that, with forethought and planning, can help ensure your loved one’s – or your own – future is secure.

1 Alzheimer’s Association, “2021 Alzheimer’s Disease Facts and Figures”

Don’t Let Estate Blunders Get in the Way of Your Wishes

April 30, 2021 Tyler Goodrich

These cautionary tales of estate planning mistakes offer a few important lessons.

You’ve worked long and hard to build your estate. Don’t let blunders keep your wishes from being carried out and leave your family – and wealth – in the lurch.

Here are a few lessons to keep in mind.

No plan in place

Prince Rogers Nelson did a lot of things right in his life, leaving an indelible musical legacy that spanned generations. Unfortunately, his financial legacy wasn’t as successful. The artist formally – and formerly – known as Prince passed away in 2016 without an estate plan in place. Years of legal battles ensued.

Prince didn’t have a will, an executor or a trust in place, which left his hundreds of millions of dollars, his music library and his assets up in the air. In the void, multiple people vied to serve as the executor of the vast estate. With so many in the mix, the petition went to court, with siblings and half-siblings battling for control.

The point is that it’s imperative to not just name your executor or any other position with responsibility for overseeing your wishes (like a trustee or power of attorney) but to cast the right person in each role. Thoughtfully selecting these financial caregivers could help you avoid the bungles and blunders that even celebrities fall prey to.

Smoke and mirrors

Tobacco heiress Doris Duke left behind an estate worth $1.3 billion and a sizable sum to her charitable foundation. She named her butler as executor and trustee of the foundation. It wasn’t long before his spending was called into question, and he was booted by a probate judge, only to be reinstated by a higher court. A battle ensued and the parties settled on a board of trustees to manage the foundation.

The moral of the story? Thoroughly vet your chosen representative. Be extra careful whom you pick as an executor, trustee or guardian. For a large trust or foundation, a corporate trustee or board may be ideal to handle financial and administrative tasks. Also, have a backup plan in case your chosen designee declines the responsibility or is unable to uphold his or her duties.

The dotted line

One gentleman went through all the motions with his attorney and financial planner, setting up a will and living trust, but he never signed them. Time got away from him, and, sadly, so did his memory. As his Alzheimer’s advanced, his family stepped in to help, but were dismayed to discover the invalid documents. Because there was no trust or power of attorney to dictate the man’s wishes, a guardianship was required to manage both his personal and financial affairs. The family was forced to go through a court to manage his finances, a cumbersome and expensive process, and his wishes for the final distribution of his assets didn’t occur.

The lesson here? Resolve to be proactive. Waiting puts you and your estate at the mercy of life’s great unknowns. We can’t guarantee tomorrow, as much as we’d like to, but we can do as much as possible to ensure that our loved ones are taken care of when we no longer are able to do it ourselves.

Sources: More than Money 360; Broadridge; Florida Bar; fox43.com; caregiver.com; National Caregivers Library; mylifesite. net; money.usnews.com; Raymond James research; legalzoom.com; MFS; cnbc.com; uslegalwills.com; caring.com; Accenture; cegworldwide.com; Nuveen; kiplinger.com