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The stock market was able to hold on to gains last week; even in face of Friday’s disappointing news on the employment front. U.S. job growth fell to its slowest pace of 2021 in September. The Delta variant along with a persistent shortage of workers is holding back the economic recovery struggling to expand. On the plus side, U.S. jobless claims fell for the first time in four weeks as employers refrain from laying off workers in a tight labor market. Interestingly, 75% of executives surveyed anticipate increased spending in automation and technology over the next several years.

The other major news last week came from the announcement that lawmakers reached a deal on a short-term debt-limit extension. The moves staves off a potential default by the U.S. government for a couple of months. Our congressional leaders now have until December 3 to hammer out a deal.

The chart below from FactSet illustrates the concerns corporate executives have about their companies. As I titled this week’s commentary, Supply Chain and Lack of Workers Concern Businesses, more and more analysts are worried these challenges may be more persistent than originally thought. When global leaders shut down their economies due to Covid, they choked off supply. By flooding consumers with government checks, they increased demand. Greater demand with less supply is the perfect recipe for inflation. Our economic recovery will continue to struggle until these issues improve.

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The Markets and Economy

Nearly 140 countries agreed to the most sweeping tax overhaul in global history setting a minimum corporate tax rate of 15%. The accord, which is a decade in the making, must now move to the lawmakers of each country for final approval before being ratified and enforceable.
China’s largest property developer, Evergrande, continues its slide toward an inevitable bankruptcy as it missed $1 billion in interest payments to creditors. A 30-day grace period now begins.
Escalating costs as well as labor and transportation challenges are forcing major U.S. food companies to raise prices. While companies are reporting higher sales volume, the rise in costs is greater, reducing profitability.
As of September 19, 73 vessels were anchored and awaiting entry into ports of Long Beach and Los Angeles, an all-time record. An additional 37 vessels were drifting in the ocean within 20 miles of the California ports.
The U.S. trade deficit widened to a record in August due to American consumers strong demand for imported goods such as pharmaceutical supplies, toys and clothing.
Oil prices hit a seven-year high last week as OPEC and a group of oil producers led by Russia agreed to increase crude production, but only in “measured steps”. Analysts had hoped for more output to help stabilize the price of oil. Last week it closed at $79.35 after briefly rising above the $80 a barrel mark.

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.

Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Securities offered through Triad Advisors, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.

David Kover on October 11th, 2021

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