16 talking points that'll make you sound smart at Thanksgiving 🦃🍗
Calm discourse is what the holidays are all about
Hello readers!
It’s that time of year when families come together to celebrate the holidays, enjoy each other’s company, and engage in thoughtful and civil discourse about politics, social issues, religion, cryptocurrency, and so on.
If you’re lucky, the conversation may pivot to the stock market and the economy.
TLDR: The stock market is trading near its all-time high, and the economy is in pretty good shape. On Wednesday, we learned that initial weekly claims for unemployment benefits fell to their lowest level since Thanksgiving 1969, which is a good sign for the labor market; core capital goods orders reached a new record high in October, which means businesses are aggressively investing for the future; and personal incomes ticked higher in October and have been outpacing inflation since February 2020. That said, no one is saying inflation isn’t hot: The Fed’s favorite measure of inflation is at its highest level since 1991.
Below are a few highlights from TKer that may help as you further engage in these topics.1
👩🏻💻 Job openings are everywhere: There are 10.4 million job openings. In fact there are more job openings than unemployed Americans. This is bullish, because businesses wouldn’t be hiring if they didn’t need that help. (Link)
🤔 There are a lot of reasons jobs are going unfilled: We’re still in a pandemic, and many workers are concerned about getting sick. Many are facing childcare issues. Many have retired. Immigration is way down. There are fewer people working multiple jobs. (Link)
⚙️ Businesses are aggressively investing in themselves: Capital goods orders are at record highs. And intentions to increase capital expenditures are on the rise. In other words, businesses are buying a lot of equipment right now as they ramp up their operations for future growth. (Link)
📦 Businesses need inventory: Inventory levels at businesses are depressed because demand for goods has been strong, while supply chain issues have limited the ability to keep stockrooms well-supplied. Inventory replenishing will be a huge tailwind for the economy in the months to come. (Link)
🎈 Inflation is at a historic high: The consumer price index in October jumped 6.2% from a year ago, the biggest increase since November 1990. (Link)
🦃 Thanksgiving dinner is more expensive: The cost of Thanksgiving dinner is up 14% from a year ago. (Link)
…Why inflation is high: The big driver of inflation has been booming demand from consumers, including the 18 million people who have gone back to work since April 2020. (Link)
…Which is why supply chains are backed up: Consumers’ and businesses’ booming demand for stuff explains why it’s taking forever to get goods through the ports. (Link)
💸 People are willing to pay for inflation: Consumer sentiment has been low because people are upset about inflation. However, retail sales data continues to go up. This means people will begrudgingly pay up for stuff as long as they can still afford it, which they can with their $2 trillion+ in excess savings. (Link)
📈 Big companies and their stock prices are thriving: Despite the rising cost of raw materials and labor, big companies have been able to maintain fat profit margins. This is due to a combination of price hikes and operational efficiencies unlocked during the pandemic. (Link)
🚶🏽♂️ Workers are returning to the office: In May of 2020, 35.4% of American workers worked from home due to the pandemic. That number has been on a steady decline and touched a low of 11.6% in October. (Link)
🏘 Residential construction is happening like it’s 1974: There haven’t been this many homes and apartments under construction in the U.S. since 1974. While it’s tempting to say this is a housing bubble, it seems to be the case that it’s just a result of lengthy delays due to labor and parts shortages. (Link)
🏛 A tighter Fed isn’t doom for stocks: It’s the case that the stock market has gone up as the Federal Reserve lowered interest rates and deployed stimulative monetary policy. Historically, it’s also the case that the stock market has gone up during periods when the Fed raised rates and dialed back stimulative monetary policy. (Link)
📉 Stocks could fall in 2022, and that’s okay: At least one top Wall Street forecaster expects the S&P 500 to fall by about 6% next year. That’s not too bad for long-term investors, who should understand that long bull markets often come with down years. In fact, the S&P 500 fell 6% in 2018 before resuming an 11-year-long bull market. (Link)
🤦♂️ People are terrible stock market forecasters: When asked, most people are likely to tell you that the stock market is unlikely to be higher in 12 months. But historically, the stock market is usually higher in 12 months. (Link)
📈 Stocks usually go up: In case you missed it, check out my 10 Truths About The Stock Market. It’s been clicked on over 14,000 times!
Feel free to forward this to whoever may need it. You can also find a link to the free web version of this post at TKer.co.
Happy Thanksgiving!
Sam
PS: The fine folks at ETF Trends have included me on their #ETFintwit Top 50 list. My Thanksgiving has been made.
Some of the posts linked reference data that have been updated in recent weeks. I checked all of them. There have been no updates that materially change any of the longer term narratives discussed.
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