- U.S. equities finished higher Tuesday, following a sizable rally on Monday. There were no major data announcements today, keeping the market's focus on the Fed, with stocks enduring a wide swing over the previous few trading days as investors have attempted to square the strong economy with the Fed's future policy shift to address higher inflation. Consistent with the modest move in the broad indexes, sectors traded in a tight band, with consumer discretionary and energy leading today while 10-year rates were little changed, hovering just below 1.50%. Overall, it was a quiet day as market's catch their breath and look ahead to PMI and labor-market data later this week.
- Markets saw a lift as Fed Chair Powell spoke to Congress today, reiterating the Fed's focus on supporting the economic recovery as well as emphasizing its belief that this recent spike in inflation will prove transitory. This week is chock-full of speeches by Fed governors at various events, which the market is evaluating for further signals of the Fed's thinking on an upcoming timeline for tapering bond purchases. We expect the Fed to begin to withdraw some stimulus later this year, but we think rate hikes are still a ways off.
- Crypto assets were back in the headlines today as the price of Bitcoin briefly dropped below $30,000, the lowest level in five months, amid concerns of a regulatory crackdown from Chinese policymakers. While the S&P 500 is trading less than 1% below its all-time high, some of the year's highest-flying, speculative investment areas have seen the return of significant volatility as the economic rebound progresses and the outlook for policy stimulus evolves. We think this highlights the value of portfolio diversification and allocations to investments with a solid fundamental outlook.
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