June 8, 2021
U.S. equity market performance was basically flat in May as persistent global supply chain constraints, rising commodity prices, labor shortages, and the prospect of further fiscal stimulus amplified investor concerns about unchecked inflation.
We believe many of the global supply chain issues currently plaguing producers, and driving costs higher, will be largely resolved by late 2021 or early 2022. Labor availability should also improve as pandemic fears ease and unemployment benefits expire, curbing the prospect of uncontrolled wage inflation. We continue to believe the core PCE Price Index will moderate to the low +2.0 percent range by year end, giving the Federal Reserve the wiggle room needed to remain accommodative.
We remain constructive on U.S. stocks and maintain a pro-cyclical stance within investment portfolios. We continue to invest opportunistically and added to select high growth stocks, especially within software and biotechnology, after an interest-rate-related selloff in higher PE stocks. We also increased positions in some consumer holdings as a sharp improvement in employment/wage prospects augments stimulus. Given the inflationary backdrop, we have tilted portfolios toward companies with pricing power, notably those within the industrial, chemical, transportation, and insurance sectors.
Sit Investment Associates will continue to operate at the highest level during this outbreak, and we invite you to contact us with questions or concerns. You can reach us at 612-332-3223 or email us at email@example.com. We will continue to post updates about market and economic developments on our website at www.sitinvest.com.