Week Ending May 7th, 2021

Dow Jones Industrial Average and SP500 recorded another good week while Nasdaq composite posted weekly loss last week. Janet Yellen and Larry Summers’ remarks fueled inflation worries although Treasury secretary clarified later that her remarks were not intended to be a prediction of persistent inflation. Friday’s jobs report showed that non farm payrolls expanded by only 266,000 in April, which is almost quarter of the widely expected jobs number.

The disappointing jobs number was interpreted as “no inflation” and “no rate increase or tapering any soon”, which propelled the stocks to higher levels on Friday. I believe the unemployment rate will continue its downward trend as effects of stimulus checks and other benefits fade away and if we do not see any unexpected new coronavirus wave due to new deadly strains. The investors should not build their new thesis based on this latest jobs number only. Moreover one should always be on the lookout for subtle but structural changes due to supply chain constraints and the cost push inflation factors.