Anyone who has ever traveled with young children has experienced the almost never-ending question of “Are we there yet?” These days that question is also applicable to the almost mythical ‘Return to Normal’ that we’ve been promised. And yet the world each day continues to throw up points of information that don’t quite fit into logical expectations. Here are a few examples:

  • The official jobs reports in August were surprisingly disappointing, again. According to those who count such things there were about 11 million jobs available and also 8 million people unemployed. These particular unemployed are able-bodied and considered to be part of the available workforce. In August, a full 50% of small businesses reported having job openings that they could not fill. Shockingly, 29% reported having ZERO qualified applicants. So, what has created this disparity? Are people just not interested in working anymore? It appears that could be part of the problem. Many people have been afraid (literally) to circulate among others due to Covid19 concerns. Expanded and extended unemployment programs have made it easier to adopt a lifestyle that does not include having a job. But, as the Delta Variant is receding, the Covid19 impact should be on the wane and one would expect folks would be anxious – or at least willing – to return to work. One concern seems to be one of those unintended consequence things: Once people have figured out how to get by without going to work and that condition is sustained for months at a time, that has become their new normal.
  • Our whole population is being given conflicting information about the pandemic. Consequently, employers are having a very uneven set of responses which are reflected in their policies. Our healthcare industry reports alarming shortages of healthcare workers and yet just last week a major hospital group in North Carolina fired 175 nurses over disagreements about being vaccinated.
  • In America and across the pond in the UK, gasoline and natural gas prices have risen about 180% in the last six months. Historically, when energy prices rise it is due to actual shortages of supply. Not this time. It has more to do with a lack of truck drivers than a lack of energy products at the source.

I could easily add more examples to this list, but you get the idea.

Another aspect to all of this is yet more from the latest supply of unintended consequences. It is reasonable to expect that when companies have trouble filling jobs they respond by increasing incentives, such as higher pay. This is precisely what they have done but to surprisingly little effect. So, costs of labor are statistically going up but productivity and worker participation…well, not so much. What likely will be going up then is inflation.

We do not want to allow ourselves to become overly pessimistic. After all, one of our key operating principles is that ‘the sun is always shining somewhere’ and our mission is to find it and help our clients benefit from it.

However, our in-house two-handed economist says that if normal doesn’t show up soon, we might not recognize it when it finally appears.


Ron’s Market Minute – Market Takes it on the Chin

On Tuesday of this week the markets were hit with the ugly stick. That put a major pivot full on.

All major indexes were hit and in the sectors the losses varied depending on their economic exposure. Still, I believe that the decline felt worse than it was. There has been an excessive amount of negativity lately in the media. Add to that, the largest real estate company on earth (Evergrande) defaulted. Inflation has been…. well, hot. Headlines say that the government is running out of funding just as it hits the debt limit. In a word, there’s enough to be concerned about. 

Now, readers know that we’re not all that concerned. Banks in the US are way over-capitalized and have a roughly zero percent exposure to Evergrande. The current inflation isn’t surprising as it’s been pretty hot for a year now, and especially so since this spring. And seriously, who doesn’t think the government will be funded and the debt ceiling raised?

Yet the markets are a bit ……uneasy. And they’re in a pullback mode since the early September peak. We’ve not seen a 5% pullback since last October, and it’s not common to see a year pass by without a 5% pullback. Perhaps we’ll get there as we start October. Last week’s low may be exceeded but that’s not a key issue. As I’ve said before I have a strong conviction that the market is going on to new highs in the fourth quarter, and likely we’ll see markets broadening as well. We’ve been adding financials and commodities as their prices go on sale.  

So, try not to get caught up in the nonsense that is going on in the nation’s capital. And I suggest you ignore the nay-sayers that are suggesting you high-tail it away from tech holdings because long term rates appear to be rising. We’ll posture that the next rally may see tech, banks, and energy leading. 

The concept that ‘as rates rise, tech falls’ is, historically, nonsense. It’s just noise. 

We do not want to allow ourselves to become overly pessimistic. After all, one of our key operating principles is that ‘the sun is always shining somewhere’ and our mission is to find it and help our clients benefit from it.

However, our in-house two-handed economist says that if normal doesn’t show up soon, we might not recognize it when it finally appears. 

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


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