Labor Market Sets New – And Worrying – Records In The US As Covid Restrictions Ease, Life Becomes Somewhat More Normal, And Efforts To Get Back To The Office In Serious Beginning; Job vacancies are at their highest level on record, layoffs have hit a record low, and workers are quitting at record speed. Prices are also rising, spurred at least in part by the need to accommodate higher wages, although the rent collapse caused by the pandemic could prevent the rise from being fully reflected in the CPI … as long as it lasts. Equity markets are now returning to a ’90s pattern and value stocks have continued to outperform. And it’s been a busy week for Bitcoin after falling on the back of the accidental seizure of the Colonial Pipeline and then legal tender for the first time in a landmark move by the Salvadoran government – does such a mix of headlines mean any more? Could volatility be in store?
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1. The unusual continues as job vacancies hit a record high. Companies want to hire, but the lower end of the pay spectrum is still competing with pandemic unemployment benefits.
2. After more than a decade with a limited ability to pass on price increases, companies can and will now pass on higher prices:
3. Many have argued that the CPI was underestimated during the pandemic. 42% of the CPI is the housing component, and while “equivalent rents” have collapsed, buying a house has become much more expensive:
4. The US consumer is, on average, in excellent shape. How much of this is due to government payment moratoriums and defaults?
5. Student loan indebtedness is again an emerging macro problem. The payment moratorium ends in October and many have simply stopped paying. The default rate is higher than with junk bonds!
There is an alternative: lower the interest rate to 1% above the 10-year Treasury yield (for service costs). The repayment is much cheaper for all borrowers, but also fair for those who have already paid off their loans.
6. “History does not repeat itself, but it often rhymes.” While the author is debated, this remarkable comparison with the late 1990s is not:
7. The shift from growth to value is a global phenomenon …
8. Wait, so a supposed currency that was largely designed for criminal companies is prone to fraud? Are cryptos under pressure because the U.S. government recovered much of the Colonial Pipeline’s ransom?
9. As we mentioned on Monday, who will buy them if the Fed stops buying new bonds, and at what price / yield?
10. China, like the US and Europe, has a cheap CPI but a rising CPI. Something has to give way soon …
11. After a parabolic rise, many goods return to earth. Here is wood:
12. Can you name the three countries with the most oil reserves?
This article was contributed by the Beaumont Capital Management (BCM) Investment Team, a participant in the ETF Strategist Channel.
For more information like this, visit BCM’s blog at blog.investbcm.com.
Disclosure: The charts and infographics included on this blog are typically based on third-party data and are believed to be accurate. The comment contained is the opinion of the author and can change at any time. Any reference to specific securities or investments is for illustrative purposes only and should not be construed as investment advice or a recommendation of action. Individual securities mentioned can be held in customer accounts. Past performance is no guarantee of future results.