Last week was really a full week for news. The conventions to nominate candidates for President and Vice President have come and gone. There was another police incident in Kenosha, WI that sparked more protests and violence. With all that happening the equity markets continue to defy expectations and, in some cases sensibility, as they march to newer and higher valuations.

However, we might want to take a step back and look a little closer. For example, the S&P 500 has hit new highs, but the index is the most concentrated it has ever been, which presents an issue we need to be cognizant of. 23% of the index’s value comes from 5 enormous mega-cap stocks that have exploded away from the greater market: Facebook, Amazon, Apple, Microsoft, and Google, otherwise known as “FAAMG”. History doesn’t repeat itself but sometimes it looks very familiar. The dot-com bubble of the late nighties blew a gasket and destroyed a lot of paper wealth. Will this happen again, not sure, but it’s worth noting.

While all this was happening, almost unnoticed was the announcement that the Federal Reserve was changing their focus from keeping inflation below 2%. They will now focus on keeping inflation at an average of 2%. Since it has been well below that for several years, that means the Fed will tolerate inflation higher than 2% for who knows how long. The talking heads are mentioning interest rates may stay low for a long period of time. They’re also talking about hyperinflation. The attached article does a deep dive on that, so I hope you read and enjoy what it has to say.

Next weekend is Labor Day weekend and I have promised Jean I would take a break and spend some time with her. So, I will be closed on Monday (as are the markets), and therefore, no Monday email. Please note that, should you have any questions or just need to speak with me, don’t hesitate to call or email. Now let’s all go out and make it a super week.

Doug Alden

Link to article…

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