Last week was like a seesaw for the market, trying to stem the tide and reverse the downside trend of the past month.
Blue-chip names led the way as the cyclical trade came on stronger, led by Energy and Financials. All the major indices were lower for the past month, and only the Energy and Financial sectors are higher over the same time (note: they don’t have the juice to carry the S&P 500 or NASDAQ Composite).
Technology and Communication Services are looking very enticing, but momentum is with value coming into the week.
To see the chart, click here.
Bond Yields
Spiking bond yields are driving the action in the stock market. Now, conventional wisdom says inflation will remain stubbornly higher and much more durable. The wildcard with all of this is how the Federal Reserve reacts to inflation. While at the same time wanting to remain accommodative for as long as possible.
Where are the Workers?
Jerome Powell looked like a genius when the jobs report rolled out on Friday. Instead, it was another ‘dud’ that left economists’ mouths agape. The nation is way behind in its efforts, and more importantly, the ability to put people back to work. The ability is there because 10.9 million jobs are out there (JOLTS will be updating this week).
Powell won’t be fooled by the unemployment, rate even though the same economists that missed the jobs number later decided the outcome won’t sway the Fed from tapering next month. If Powell & Co want to wait longer, they have the room to wait, even if they have been completely wrong on inflation.
I read some good stuff over the weekend, including a good piece on why the Fed may not want to overreact to inflation since its toolbox is limited, and ultimately, the cure for higher prices is always…higher prices. Perhaps the workers’ strike is transitory, or at least more so than inflation, but there shouldn’t be any guessing.
Something has changed with the American worker.
My Thoughts on the Great American Workers’ Strike
From Payne’s Perspective – for a copy, contact your representative, or research@wstreet.com
There is no single reason for the dearth of folks willing to work. I think it boils down to a few things:
- Free Money
- Free Time
- Free Thinking
- Freedom
Folks got a lot of money through three separate fiscal rescue and stimulus programs. These plans covered trillions of dollars, and according to the Tax Foundation, a total of $867 billion was authorized as direct payments.
The third round of ‘stimmy” checks mainly went toward shopping. But a significant number of folks also put it away in their savings, and half of the check paid off their debts.
This strategy left households in great positions economically, and it has allowed folks to take their time getting back into the labor force.
This Week, Earnings Season Starts
Key reports this week include:
Tuesday
- Delta Air Lines (DAL)
- BlackRock Inc (BLK)
- JP Morgan Chase (JPM)
Wednesday
- Wells Fargo (WFC)
- Citicorp (C)
- Domino’s Pizza (DPZ)
- Morgan Stanley (MS)
Friday
- Goldman Sachs (GS)
- Charles Schwab (SCHW)
- Oncolytics Biotech Inc (ONC)
- J.B. Hunt Transport Services (JBHT)
- Prologis Inc (PLD)
- Truist Financial (TFC)
Portfolio Approach
There are no weighting changes this morning in our Hotline Model Portfolio.
Today’s Session
West Texas Intermediate is picking up speed as it breaks out, trading above $81 per barrel.
In addition to oil stocks, we might see reopening stocks catch a bid as flight searches increase and Covid19 concerns decrease.
But Southwest (LUV) is lower after mass cancellations that management blame on weather and FAA issues – FAA denied those excuses. Speculation is the lack of workers is a direct reflection of actions taken by employees to protest the company’s vaccine mandate.