By: Jeff Anderson, CFA
This Week: The S&P 500 closed at 4,682.85, down 0.3% for the week but still up nearly 25% on the year. The US 10-Year Treasury yield closed at 1.57%, down 0.5% despite all the inflation news. Crude Oil was also lower, finishing the week at $80.81 per barrel, down 0.44% this week but still up a lofty 67% on the year.
- Market Update
- Inflation Fears
- Americans Quit
Inflation Fears Sink Consumer Confidence
US Consumer Confidence just hit a 10-year low. With equity markets at all-time highs and the demand for housing as strong as it is, one would expect a different number. However, at the top of most consumer’s minds is not the buoyant markets for stocks, crypto, and housing. It’s inflation. The effects of a jump in inflation rates can cause households to cut discretionary spending and/or purchase the necessities that are at most risk of seeing further price increases. Take automobiles for example. New cars are selling for prices that are 10 to 20% above sticker price. Those that need a car are forced to pay up. Those that don’t will wait…until they need to, hoping that prices will return to normal.
“Waning confidence reflects ‘an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation,’ Richard Curtin, director of the survey, said in a statement.” Political pundits claimed President’s Trump defeat in 2020 was due to his handling of the pandemic. The inflationary effects brought on by the pandemic response from Mr. Biden are causing an equal dramatic drop in his approval ratings.
US Inflation Reached a 30-year high in October:
“The Labor Department said the consumer-price index (“CPI”) increased in October by 6.2% from a year ago.” Even stripping out food and energy (hey, who needs to eat or drive?), CPI rose 4.6% for the month.
The two inflation camps’ arguments were that is permanent vs transitory. Now, the transitory camp is saying it is “transitory for longer.” As we’ve said in previous updates, many of the inflation pressures today are due to supply bottlenecks. We won’t know whos’ right for a while.
The goal for any investor is not to “predict” the future, but rather to “be prepared” for it. Whether inflation ends up being transitory or not, there is inflation now. The cost of almost everything is going up. That’s a fact.
A record 4.4 million Americans Quit Their Jobs in September:
The pandemic has turned everything on its head. Life is short. Things happen. Many people are contemplating their future resulting in many career changes, some of which, involves lifestyle changes. Working from home for has allowed them the freedom to live wherever they want to, free from the shackles of the office. On top of that, some workers believe that they can earn more elsewhere, as the demand for certain skills is driving wage growth.