Last week, U.S. equities were lower with the S&P 500 logging its worst week since February after a 1.3% decline on Friday. Equity markets struggled as investors continued to digest the more hawkish-than-expected Federal Open Market Committee (FOMC) meeting and the Federal Reserve (Fed) dot plot that suggested two potential interest rate hikes in 2023. When we laid out our 2021 primary investment themes, we noted mounting risks would be a concern as the economy transitions from an early-cycle to mid-cycle recovery. One specific risk we highlighted is potential inflation and the Fed being too optimistic about its transitory nature. We feel last week was a clear sign that both the Fed and financial markets might be wrong.

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Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.