total investments and quarterly growth chart Source: Callahan & Associates

Latent effects from three rounds of stimulus payments translated to annual deposit growth of 14.9% in the second quarter of 2021. However, from the first quarter, share balances rose just 1.1%, down significantly from the 8.3% quarterly growth a year ago but nearly twice the average rate reported in the second quarter over the preceding three years. With direct federal and state benefit payments slowing and ceasing in the second quarter, it’s evident that members across the country are still cautiously managing their finances and avoiding large purchases and investments. A new wave of COVID-related news further clouds the outlook for economic recovery moving forward with more to be revealed in the coming months.

Markets largely interpreted the June Federal Open Market Committee (FOMC) highlights to be more hawkish than prior meetings, notably the shift in median participant forecasts for the Fed funds rate (“dot plot”). The consensus moved from the March meeting where no rate hikes were projected through 2023, to 50 bps of rate hikes by year-end 2023 in the June meeting. Moreover, pressure to address tapering the Fed’s asset purchases continues to mount as the FOMC navigates guidance for a future reduction with many market participants expecting a more concrete plan in the coming months and conversations begin and progress.

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