It is bad enough that we are facing shortages of all sorts of things. Shortages create scarcity and scarcity drives prices higher. What gets my goat (I think I only have one or two left) is ‘The hits just keep on coming’. Supply chain problems? Who saw THAT coming? Afghanistan given to the Taliban? Who saw THAT coming? Up to a million aliens illegally crossing our Southern border? Who saw THAT coming? Energy costs up 100+ percent? Who saw THAT coming?

I find it rather bizarre that now a lot of Americans are finding themselves a bit freaked out about the possibility that hiccups in the supply chain may manifest themselves in a lack of presents under the Christmas Tree!

One only has to think back to the not-so-long-ago pre-pandemic days of cheap gas, energy independence, nearly full employment. Those were the days, my friend.

Now, if you are growing a bit weary, we do not blame you. A truly unfortunate side effect of the seemingly incessant supply of negative surprises is the malaise now penetrating the American psyche.

When Covid19 first appeared, it may have frightened us – humans are wired to fear the unknown – but we had seen new virus threats before and, for the most part, we believed that this was a management problem more than a ‘the end of the world as we know it’ problem.  Much of the early management was good, but in actual fact, nearly everything we have done in response has brought along another unintended consequence. Purposefully shutting down the economy now seems to have been an over-reach – to put it gently.

And now, we may be saddled with another over-reach. Vaccine mandates have accelerated and underscored people’s feelings on the issue of personal rights. As a society our responses have been uneven and contradictory. Police officers in major cities have quit their jobs at the same time their employers were desperate to hire new cops. Hospitals, already short staffed, have fired hundreds of nurses for refusing to be vaccinated. Several major airlines are requiring the jab but pilots are not going to work. Meanwhile, one of the largest tech companies in the world (think ‘tech” = ‘science’), Intel, announced that they would resist having a mandate. They would ‘encourage’ vaccinations but said they respect that getting a vaccination is a personal choice.

But, as Biden would say: Here’s the deal: Regardless of where you might be on the wide spectrum of opinion, you are still going to be affected by fewer cops, fewer healthcare workers, and less stuff on the shelf, most of which will be selling at higher prices.

Up in the third paragraph I mentioned ‘malaise’ and that has become my larger concern. An awful lot of us are feeling a little beat up, wondering why it is taking so long to get things under control. Wondering too when another unexpected shoe will drop.

There is a silver lining around some unintended consequences; when they show up, they may be quickly seen as a bad by-product or error and it’s ‘all hands on deck’ to fix it. I think that’s what we have at the backed-up ports of Los Angeles and Long Beach. If we have a man-made problem, a man-made solution should be at hand to remedy it. The troubled California ports are suffering from poor coordination among all those with a finger in the pie. Biden (probably) could mandate cooperation and that may happen. Meanwhile Governor DeSantis has announced that any or all of the back-logged ships can come to Florida. His ports are open and the ships are welcome. Sure, that’s a long trip but it is a possibility.

Now is not the time to dwell on inconveniences. Now is not the time to head for the hills. Now is not the time to think about converting your assets into something that can be stuffed under the mattress. Instead let us recall the words of Scarlett O’Hara: “Tomorrow is another day.” And one that we expect will be brighter.

Ron’s Market Minute – Sloppy Markets

Read any text dealing with markets. They all state that market corrections are ‘normal and healthy’. Sure, that’s so easy for THEM to say. Somehow though, it doesn’t actually feel ‘normal’ or ‘healthy’ when you’re right in the middle of one of those corrections. It’s tough to see the bright side of the big picture when prices start to ‘plunge’ (and then recover, and then plunge again), volatility starts to spike, and the media is all about scary possibilities.

Even a 5% pullback looks big when it is in progress. And that’s kind of what it looks like we’re seeing at the moment. Call it a corrective phase if you like. Or a consolidation. You may remark that the future looks ‘a bit cloudy’- or ‘the road looks a bit bumpy’. The encapsulate phrase should be ‘even when markets are going UP, they do not do so in a straight unbroken line’.

I’d suggest that the most concerning idea at the moment is the reality that growth is currently slowing. This does NOT mean a recession is coming. It merely means that the RATE of growth is slowing down. The difference is important. And we’ve said before that this was to be expected somewhere along the way.

The explosive growth that we saw over the recent quarters was artificial. Remember that the economy had been intentionally closed down and then reopened in a heartbeat. It was reasonable to see some monstrous growth when the reopening was upon us- especially with all of the Washington-induced growth (stimulus). So now we have the initial stimulus wearing off and the great surge behind us.

Will we be seeing a 4% GPD as some of the pundits suggest? Or will it look more like the more blasé growth rates we saw before the COVID – perhaps more like 2 or 2.5%? From here, this slowing of growth expectations may be the reason why stocks stopped bouncing when the calendar flipped to September. Economic reality seems to have set in. And the reality is that although the future looks bright, it’s not looking quite as bright as it did in the summer. And here’s the bottom line — according to me: Traders just don’t know what the future looks like. How long till the chip shortage ends? When will supply chain issues stop impacting prices? When will there be enough truckers to get stuff where it needs to go? And speaking of ‘stuff’, when will the prices of stuff actually look ‘temporary’. Etc., etc., etc.

Until there is some clarity, seems like we could expect more sloppy markets and continued volatility.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

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