Now that we are past the half way point of 2021, we can investigate the potential impact of lingering supply shortages on profits and growth expectations. The number of businesses reporting negative impacts due to shortages peaked in May. While supply chain issues definitely remain, bottlenecks are easing and supplier delivery times are improving, as production catches up to demand and consumers rebalance their spending between goods and services. These improving supply chain conditions could help consumer confidence, as more moderate price increases could result in less fear about inflation. In spite of all the anxieties about Covid, inflation and government spending, analysts continue to raise earnings forecasts as companies have consistently surpassed expectations. In 2021, earnings for U.S. and foreign stocks are estimated to be 20% to 30% above 2019 (pre-pandemic) levels and 55% above 2020. Interestingly, the stock market is currently 34% above its pre-pandemic peak in February 2020. If projections for 2022 are accurate, the stock market is priced at a price to earnings ratio of 21 and an earnings yield of 4.8%. This is a fair valuation and relatively attractive when compared to a 1.3% 10-year Treasury yield. Keep in mind earnings will likely grow mid-single digits over the next decade; bond yields will not.