Quarterly Update

I hope this letter finds you doing well and staying cool with the recent heatwaves in the Pacific Northwest and around the country. We have just finished the second quarter of 2021, and already this year has had a great start from a return standpoint, much of which is owed to a huge upswing in GDP as the US reopens. In their midyear report, Blackrock shared this chart showing trends in GDP since just before the pandemic, as well as estimates for the next year or so. You can see how early 2020 hits a bottom for all countries, but if you were to take that data point out, the trend line is far smoother, suggesting that the pandemic has served more as an “interruption” than throwing future economic data fully off track.

Just as we’ve seen an incredible growth in GDP relative to this time last year, we’ve also seen rising inflation. The two often tend to move with one another in a well-functioning economy. The Consumer Price Index rose 5% from May 2020 to May 2021, the highest annual increase in 13 years. However, it’s important to note that any metric during that timeframe will be skewed because of the far-reaching impacts of the global shutdown. The Wall Street Journal noted that if you compare May 2019 to May 2021, the annualized increase is smoother.

Many of the goods used to measure the CPI have increased significantly in price due to supply chain issues. For example, a chip shortage due to lack of production has been a major factor in lack of supply of new vehicles, causing huge increases in used cars (up 30% since last year) and car rentals (up 110% since last year). The Federal Reserve has commented that they believe these inflation impacts are mostly short-term as the economy expands back to its pre-pandemic size, and we are inclined to agree. Over the next year, we expect further increased production to rebuild inventory, and less disruption in the supply chain as the developed world continues to reopen will help to flatten these pricing increases.

On another note, I’m excited to introduce our 2021 summer intern, Grace Tennant. Grace is a lifelong Portlander who is a rising junior at Cal Poly in San Luis Obispo, studying Business Administration with a concentration in Finance. On her days off, she has been taking advantage of the sunny Portland weather to brush up on her golf game. Grace has been shadowing our team members and learning about our new client processes, how I prepare for meetings with clients, the ins and outs of financial planning, and many other topics. She will be with us through August, and we are really excited to have her.