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What the Market?
Mr. Market is definitely grooving after a jobs report that was exactly as strong as it needed to be to keep the party going a while longer. With the delta variant starting to gain media attention worldwide, US markets should thrive on the ongoing strong corporate earnings on the backdrop of countries with lower vaccination rates (e.g., Asian nations) reverting to restrictive containment measures again.
What’s driving the market?
Americans are strapping on their job helmets and squeezing down into their job cannons, apparently. Last week Mr. Market advanced on an employment report that exceeded expectations and featured unemployment rates falling (5.4% vs 5.7% last month), accelerating wages and participation rates increasing (58.4% vs 58% last month). Great news for the labor market and kudos to Americans opting to go back to work during the Summer. Analysts believe that as the economy recovers, momentum (and pressure) is building towards the Jackson Hole meeting where the Fed will revise its monetary policy plan. Although the labor market still has a long way to go, this is a clear sign of what Powell referred to as “significant progress.” The Fed’s Vice-Chairman, Richard Clarida, also indicated that the Bank is well on track to start normalizing policy rates, suggesting that markets are already pricing in the Fed’s anticipated hawkish approach.
What’s an investor to do?
Investor mindset
Economic news is driving decisions again and markets are adjusting well to the new normal. Stay on top of the slew of economic data that is released in the coming weeks as we near the Fed’s imminent switch to a more hawkish policy decision. Secondly, as the Delta variant continues running rampant globally, low vaccination rates across developing and frontier countries will likely lead to new lockdowns and ultimately impair economic activity.
Portfolio management
With developed nations continuing to rebound amid the Delta variant spread and developing nations still hurting and reverting to lockdowns, investors are shifting their portfolios. Taking profits from risk / growth positions and moving into value plays and moving foreign reopening plays to American reopening plays. For those with exposure to emerging markets, be patient or consider cutting your losses sooner rather than later.
Keep an eye on the economy
The big news this week will be the Consumer Price Index (CPI) which will reflect the extent to which consumer prices increased last month. Core CPI is expected to rise to 4.3% yearly, a slowdown compared to June's 4.5% reading. Analysts expect energy, automobiles, and retail-related segments to drive inflation this month due to overwhelming demand triggered by the economic reopening and vaccination effort.
Upcoming Earnings
Tech: Palantir, Coinbase, Bumble, Vroom, Ebay, Sonos, Wish, Fubo, SoFi
Reopening: Airbnb, Tyson Foods, Planet Fitness, AMC, Disney
Economic Calendar:
Monday: Chinese CPI and PPI, UK retail sales
Tuesday: Chinese FDI, US redbook index and unit labor costs
Wednesday: US CPI and monthly statement
Thursday: UK GDP, industrial and manufacturing production, Eurozone industrial production, US jobless claims, PPI
Friday: Eurozone trade balance
If you didn’t know, now you know
Cuba’s communist government has legalized small and medium-sized private businesses in the wake of mass anti-government protests last month. Under the new rules, enterprises with up to 100 employees will be allowed. President Miguel Díaz-Canel said Cuba was taking firm steps to update its economic model.
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
Binging with Babish. For those passionate about cooking or looking to learn the basics, Andrew Rae’s irreverent channel is a must. A constant source of inspiration with a touch of humor and pop culture. Rae is also the author of a cookbook recreating food from movies which is phenomenal. A WTM Favorite, hands down.
Anthony Hamilton NPR Concert: Anthony Hamilton's soul sound was refined in the churches of Charlotte, N.C. Watching the Grammy winner perform, you get the hunch that it's harder for him to keep the soul inside than it is to actually unleash it
Resources
WTM Mentions Performance Tracker
A content guide to investing (books, books, books!)
Disclaimer
This writing is for informational purposes only and the author/s undertake/s no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. The author/s expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.