“When wealth realizes it’s in good hands, it wants to stay and multiply in those hands” Idowu Koyenikan
General Lyautey was reported to have the most beautiful garden in France. Surveying the garden, the general points out to his gardener that they have no copper beech tree. The gardener responds that it takes 150 years for a copper beech tree to mature and it can live for hundreds of years after that. General Lyautey responded quickly that “we’d better plant one today”
Good morning,
I trust the weekend was good to everyone.
As we attempt to work from the beach this week, my daughter Presley-Mae mentioned to me yesterday that she was having “the best day ever”. Now, it may have been the fact that she said this to me while eating gelato before 9am, but it was a statement that reminded me of something a friend mentioned to me over dinner last week. The moments that we share with our family and our friends are creating memories that will be cherished through generations. As we think of Wealth creation in terms financial capital, social capital, intellectual capital and human capital, our intension should not just focus on wealth creation, but include wealth sustainability and transference.
Wealth transference goes beyond financial capital, it encompasses the deeper responsibility of wealth, asking questions about your vision, family unity, philanthropy and growth. Defining your core values and vision will take you to a place of discovering what wealth means to you, your family and the generations to follow.
And now, to the markets
S&P equity futures are trading marginally below the level reported in our last update, and remain below Friday's close amidst a mostly negative session in Europe with Asian stocks closing higher overnight.
Big macro week ahead with US inflation and retail sales data for June, Powell's monetary policy testimony in front of Congress, Treasury sales, and China June trade, activity and Q2 data. Q2 earnings season also kicks off the week. Bullish narrative for stocks continues to revolve around easy liquidity conditions from outsized monetary and fiscal policy tailwinds, reopening momentum/economic normalization, strong corporate profit backdrop, resilient operating leverage, retail impulse, corporate buybacks and capex. Looming Fed tapering, potential inflation overshoot, margin pressures from higher input costs, bond yield signaling and coronavirus variants among higher-profile areas of concern.
Markets have grown uneasy in recent days following investor concerns that new COVID-19 variants could stall the global economic recovery despite the vaccine rollout progress. Supply-chain bottlenecks and concerns over labor-market participation are also weighing on investor sentiment. That has led some money managers to trim bets on companies that are most likely to benefit when the economy recovers.
Overseas, China will cut the amount of cash that banks must hold as reserves, releasing around 1 trillion yuan ($154.19B) in long-term liquidity to underpin its post-COVID economic recovery that is starting to lose momentum (Reuters). The ECB unveiled a new policy framework that will likely keep its easy-money policies in place for longer and will aim to take account of housing prices as the Eurozone emerges from the COVID-19 recession (WSJ).
Today, we would highlight the following:
Inflation in the world’s second-largest economy may have hit a turning point. After a yearlong run-up that pushed producer inflation to the highest level in more than a decade, China’s factory-gate prices rose at a slightly slower pace in June, raising hopes among economists that inflation in China may have hit a turning point as reported by the Wall Street Journal. China’s producer -price index rose 8.8% in June from a year earlier, edging down from May’s yearoveryear surge of 9.0%, the National Bureau of Statistics said Friday. It was the first time the figure declined from the previous month since last October. Apart from a higher base of comparison last year, the modest slowdown in the inflation measure was driven primarily by slower increase in global metal prices and Beijing’s recent efforts to manage the domestic commodities rally, the National Bureau of Statistics said. Supply-chain constraints and production bottlenecks that added inflationary pressure for much of 2021 have also likely peaked, as manufacturing starts to catch up with demand, according to economists at HSBC. Meanwhile, consumer-price inflation ticked 1.1% higher in June from a year earlier, suggesting domestic consumer sentiment remains sluggish more than a year after the pandemic was largely brought under control within China’s borders. Facing a potential slowdown, China’s State Council said this week that authorities should use monetary-policy tools, such as cutting the reserve requirement ratio for banks, to offset the negative impact of rising raw material prices. It stressed that policy makers should avoid “flood-like” stimulus and such actions should be taken at “a proper time,” without providing a timeline.
Grocery stores are stockpiling inventory as costs rise. Some supermarkets said they are buying and storing supplies of everything from frozen meat to sugar to keep their shelves full amid stronger demand. Grocery sales in the U.S. for the week ended June 19 rose about 15% from two years earlier and increased 0.5% from a year earlier, according to Jefferies and NielsenIQ data. Stockpiling by food retailers is driving shortages of some consumer staples and is challenging a U.S. food supply chain already squeezed by transportation costs, labor pressure and ingredient constraints. The move is a reversal from last year when consumers hoarded groceries because of concerns about food availability. Now, retailers are stockpiling to keep costs down and protect profit margins. When prices start rising, food sellers often purchase more inventory than they need to protect their profit. Price changes have been minor in recent years, industry executives said, generally involving a group of specific products. The current price increases are bigger and are playing out more broadly across supermarket aisles, industry executives continued. According to the Wall Street Journal, few retailers expect pricing pressure to ease any time soon since worker shortages are keeping labor and transportation expensive in the near term.
Despite these challenges, go try to find some gelato and enjoy the moments as we are moving quickly through them.
“Even the smallest shift in perspective can bring you the greatest value”
Be well & enjoy the moments
Derek