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Market Commentary 11-11-21

Kris Venezia, Market Analyst

We are in what’s called earnings season, where public companies report on how they are doing and executives give commentary on their businesses.

The main talking points have been inflation (price increases) and labor shortages (companies having a hard time hiring). Outside of that, there has been interesting commentary on how behavior is changing as society adapts to Covid.

I remember being stuck doing workouts in my living room during some of those Covid lockdowns. There was a time when it felt like gyms were finished. Well… those days are starting to fade.

Planet Fitness had a really upbeat report on their business. Executives said they’re “at 90% of workouts compared to 2019.” They noted sign ups are growing and that members are coming in more frequently each week.

Contrast Planet Fitness with Peloton, which had an awful earnings report. They had to lower guidance as demand fades for their bikes. Peloton then called an “all hands on-deck” meeting Friday to address ways to cut costs which includes a hiring freeze and less spending on advertising.

You also have Lyft reporting earnings and executives there saying prices should drop. Why would Lyft (and Uber) prices drop? Executives said they have been able to bring on more drivers and that they anticipate it will continue heading into 2022.

Lyft’s CFO said three factors are helping with adding drivers – the ending of those federal boosted unemployment benefits, drivers becoming more efficient and driving for longer hours, and more drivers are signing up as they see more people get vaccinated. With more drivers competing for riders, it helps lower ride prices on these apps.

Other quick hits that hint at society moving to more pre-Covid behavior include MGM being extremely positive on the number of people going to Vegas for fun, air travel continues to inch closer to pre-Covid numbers with airlines anticipating a lot of travelers for the holidays, and recreational marijuana sales weakening as people find other activities to pass the time.

The missing piece for airlines, restaurants, hotels and those types of industries comes from the lack of business expenses. There are still a lot of companies hesitant to fly their employees out. There are also still a good amount of people working from home. Restaurants benefit when people go into the office and run out to grab food for lunch or get dinner with co-workers/friends near the office.

I will throw in my opinion here, and I believe business spending returns in 2022. If a business owner sees a competitor bringing employees back into the office, they will probably look to do the same. If a business owners sees their competitors flying out employees to meet face-to-face with clients, they will most likely want to match that. Companies also plan their spending out in advance, so as they make their 2022 spending plans, more of that budget will go towards travel than it did in 2021.

Daryl Eckman, President

I want to talk about something that I’ve talked about many times, and it’s always worth talking about. It is keeping our expectations in line.

History does not repeat itself, but it does rhyme. Quite honestly, this is one of our harder tasks, which is keeping clients’ expectations and emotions in check when the market is performing really well.

We would not hate a market pullback. We could use a pullback to put some money to work at better prices.

Our job is to keep emotions in line. We know in the past, when people get overextended, it comes back to bite them when the next bear market comes.

We are investors, we are in it for the long haul, and we are managing portfolios with that in mind.

I also wanted to talk about the Portal. It makes our job easier and is a valuable tool for you to use to keep track of your finances. The Portal allows us to work together and keep tab of your financial plan.

Our team has a number of areas we service. We work on tax preparation. I have also made some inroads and established relationships with attorneys and realtors so we can handle what you need.

We also work with insurance. If you have any long term care needs or other insurance needs, we can get all of that taken care of for you.

One priority that has come up is making sure that heirs are taken care of in the worst case scenario. We can help your family find an inexpensive, short term life insurance policy. If the loss of income from a breadwinner would have a catastrophic impact on the family finances, a term policy can cover expenses in that worst case scenario.

When it comes to anything financial, our team is there to help you.

Clint Carpenter, Director of Operations

I’ll touch a bit on some more positive news… one of the things the Fed has said they are waiting on before really feeling convicted that the economy is doing well is a better job market. Over the past year we’ve had some really disappointing and lagging jobs numbers, with some missing the mark by over half. Well, just this past week we got some better news.

The unemployment rate has fallen to 4.6%, which is a new pandemic low and better than expectations. 4.6% is about where we were in 2016. This drop comes with the labor force participation rate holding steady at 61%, so it indicates a nice reliable number.

One report we watch closely is US non-farm payroll numbers - and it was just reported that payrolls increased by 531,000, well above the expectation of 450,000.

More positives… wages grew another half percent, so we’re up close to 5% since this time last year.

Further, a lot of the job growth came in some key industries - led by leisure and hospitality, which backs up what Kris was talking about earlier, and then that was followed by professional and business services and manufacturing jobs.

So why do these pieces of information matter? They tell us that even in the face of inflation, severe labor shortage and supply chain issues job creation is on the rise. If this is the sort of job growth we see over the next several months, we’re on a great path. Data like this plays directly into the Fed’s decision to ease asset purchases and raise interest rates which many argue needs to come soon.


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