The Realisation of a Boom-Time Economy

Macro Perspectives: Mon 5 Jul 2021

The jobs report on Friday morning came with no big surprises. As we discussed last week, the job growth will really kick in this month (the July report), as more than half the states push the unemployed back into the job market, by ending the federal unemployment subsidy.

In an undersupplied labor market that is overwhelmed with demand, these workers will be commanding higher wages - feeding into an already hot inflationary environment. 

With this backdrop, we'll kick off Q2 earnings season when bank earnings start rolling in, next week - Q2 earnings are going to be huge, especially compared to the same period a year ago - in a locked down economy.

In sum, the month of July will probably be the realisation (in the data) of a boom-time economy. It will also come with the realisation that we are entering a period where we could very well see double-digit inflation by next year.

These are the moments when wealth can be destroyed, by holding cash - and wealth can be created in key asset classes.