The Markets
What begins with the letter “I”?
Infrastructure is essential and sometimes taken for granted. Pipes carry drinking water to our homes, offices, and healthcare facilities, and carry away sewage and wastewater. Highways, airports, railroads, waterways, roads, and bridges make efficient transportation of goods and safe travel possible. Energy systems and transmission lines keep the lights on and the stove cooking. Broadband data transmissions systems assure high speed internet access.
On Thursday, President Biden and a bipartisan group of senators announced that progress had been made on the framework for a bipartisan infrastructure plan. Investors were happy to hear it. Randall Forsyth of Barron’s reported:
“…Washington this past week finally took steps to address the nation’s manifest deficiencies in its infrastructure…Perhaps tellingly, the bond market had only a minimal reaction to the prospect of further government spending. But stocks of companies that could see a bonanza of dollars flowing from D.C. had double-digit gains on the week, and the indexes notched gains averaging around 3%, with the S&P 500 ending at a record.”
Financial markets paid less attention to the other “I” – inflation.
On Friday, The Bureau of Economic Analysis reported on the Federal Reserve’s favorite inflation measure, core personal consumption expenditures (PCE). Prices, excluding food and energy, were up 3.4 percent from May 2020 to May 2021. From April 2021 to May 2021, PCE increased 0.5 percent which was lower than the previous month-to-month increase.
Yields on 10-year U.S. Treasuries moved slightly higher last week, and U.S. stocks had their best week since February, reported Naomi Rovnick and Francesca Friday of the Financial Times.
(The one-year numbers in the scorecard below remain noteworthy. They reflect the strong recovery of U.S. stocks from last year’s coronavirus downturn to the present day.)
| Data as of 6/25/21 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 (Domestic Stocks) | 2.7% | 14.0% | 38.8% | 16.4% | 16.4% | 12.8% |
| Vanguard Total Intl Index (Foreign Stocks) | 2.0 | 10.9 | 37.6 | 10.0 | 12.1 | 6.3 |
| Total Bond Market (U.S. Dollar Bonds) | -0.4 | -2.2 | -0.6 | 5.4 | 3.1 | 3.2 |
| Gold (per ounce) | 0.8 | -5.4 | 1.7 | 12.1 | 6.2 | 1.8 |
| Bloomberg Commodity Index | 1.7 | 18.4 | 45.7 | 2.4 | 1.3 | -5.0 |
S&P 500, Vanguard Total International Stock Index and the Vanguard Total Bond Market Index, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; Federal Reserve Bank of St. Louis; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
it’s hard to get excited about a ‘c-’. Since 1998, the American Society of Civil Engineers (ASCE) has been grading infrastructure in the United States. ‘A’ is exceptional, fit for the future. ‘B’ is good, adequate for now. ‘C’ is mediocre, requires attention. ‘D’ is poor, at risk. ‘F’ is failing, unfit for purpose.
The 2021 Report Card for America’s Infrastructure graded 17 categories of infrastructure. The grades were poor enough that, if the report card had been handed to a student to take home, it might never have been delivered to the parents.
- Rail B
- Ports B-
- Solid waste C+
- Bridges C
- Drinking water C-
- Energy C-
- Aviation D+
- Public Parks D+
- Schools D+
- Inland Waterways D+
- Wastewater D+
- Hazardous Waste D+
- Dams D
- Roads D
- Stormwater D
- Levees D
- Transit D-
The report’s authors stated, “If the United States is serious about achieving an infrastructure system fit for the future, some specific steps must be taken, beginning with increased, long-term, consistent investment. To close the nearly $2.59 trillion 10-year investment gap, meet future need, and restore our global competitive advantage, we must increase investment from all levels of government and the private sector from 2.5% to 3.5% of U.S. Gross Domestic Product (GDP) by 2025. This investment must be consistently and wisely allocated…”
As many teachers have told many students over the years, a poor grade means there is room for improvement.
Weekly Focus – Think About It
“There is no greater burden than great potential.” –Charles M. Schultz, Cartoonist
Best regards,
Waterford Advisors