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Infrastructure deal.

The bipartisan infrastructure deal has successfully made its way through the initial stages of legislating. Now comes the hard part – amending and securing a final successful vote in both the House and the Senate. While any number of significant hurdles may remain, the broad framework seems to be in place for this bill to eventually be signed into law. The additional fiscal stimulus from the deal has likely been baked into the markets for months already. Should the bill fail to pass or face any significant headwinds, expect the equity markets to react negatively in the short term. 

Delta variant worries. 

COVID-19 worries in the U.S. are front and center again. The emergence of the Delta variant and the recent sluggish pace of American vaccinations have led to rising numbers of infections, hospitalizations, and deaths. The markets and companies are bracing for some level of continued mitigation efforts for the remainder of 2021. It seems unlikely that the lockdown levels seen in 2020 will return. Therefore, economic activity should continue to be strong albeit not as strong as we would have expected if vaccinations efforts had kept up their spring pace.

Earnings update. 

The Q2 earnings season results have been encouraging so far. That being said, everyone assumed this quarter would be strong pretty much across the board. Earnings reports have mostly lived up to those elevated expectations. The obvious question remains: What comes next? While earnings growth has been off the charts the past year, the rate of growth is unsustainable. Most companies have managed to successfully navigate the pandemic and are prepared for growth. There may be some earnings multiple contraction should future growth prospects come down more than anticipated. But it is likely to be a shorter-term issue as both companies and consumers remain on sound financial footing.