An Act of Heroism

By David B. Armstrong, CFA | Jun 24, 2014 | Weekly Market Commentary

First, I want to mention Corporal Kyle Carpenter, Fox Company, 2^nd Bn, 9^th Marines for his heroism.  2/9 – A Marine Corps infantry battalion known also as “Hell in a Helmet,” was led by a close personal friend of mine during the day of Corporal Carpenter’s act of heroism.  I visited with this friend over the weekend and heard the whole story from his perspective.  The guts it takes to jump on a grenade to save a fellow Marine is unbelievable…along with the whole rest of the story.  Corporal Carpenter was presented the Medal of Honor last week at a ceremony at the White House.  Semper Fi, Corporal Carpenter.

The Fed

Janet Yellen was out doing her thing last week at the Fed meeting and the accompanying press conference.  What she confirmed was that the Fed leadership is in no mood to change direction, despite a recent “uptick” in inflationary pressures. But look, let’s be real about two things for a quick moment… First, it was (and is) highly unlikely the Federal Reserve would threaten the long, slow, fragile recovery by tightening the monetary screws or even HINTING at such a move.  Second – and I write this with no political slant or fire on my tongue – she’s a democrat and she was installed by the sitting President who is unpopular in the polls right now.  His party is staring at mid-term elections that have the potential to unseat the power in the Senate and make him a lame duck even before he should be a lame duck.

So there’s that.

Can anyone really be surprised that in response to a question at the press conference about rising inflation, Janet Yellen conceded the Consumer Price Index (CPI) has been “a bit on the high side,” but added that “the data we’re seeing is noisy,” and the price level is “roughly in line” with what the Fed expects?

I think that there is VERY LITTLE chance we see any sort of change in the Fed’s position on rates in the near future regardless of any more noisy data on inflation.Her willingness to keep rates low, coupled with her dovish stance on interest rates and her comment about equity valuations (she stated that they are not outside of norms) helped push both the Dow Jones Industrial Average and the S&P 500 Index to new highs by the end of last week.  (Chart thanks to Bespoke). The NASDAQ has rallied about +10% off of its April, 2014 low.  Just wait…in a few weeks all you will be reading about is how the NASDAQ is close to passing through its previous high set back in 2000.  Although I doubt there are any “patient tech investors” who have sat through the past 14 years waiting for that moment.

Sweet.  Here’s how all the indices faired last week.  All ten sectors of the S&P 500 were up last week led by energy and utilities.

 

 

Inflation

The Consumer Price Index (CPI) rose 0.4% in May, which is the fastest pace in over a year. See first chart below.

Yeah, yeah, yeah…It’s only one month.

BUT STILL – price hikes have modestly accelerated and that has the inflation hawks buzzing. Some but not all can be blamed on rising food and energy prices, two volatile subcomponents of the CPI, but the cost related to housing and living expenses are also rising.  See second chart below.

 

 

Finally, here’s the unit insignia for 2/9.

 

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