Hedge Fund Launches Are Surging

1

In the first quarter of 2021, 189 new hedge funds were launched, the highest number since the end of 2017, according to data from Hedge Fund Research.

In the fourth quarter of 2017, 190 hedge funds were started. Since then, the number of launches has been consistently lower, hitting its lowest in the first quarter of 2020 with a total of 84 launches and 304 liquidations.

“The only ones that did get launched [that quarter] were before March,” Kenneth Heinz, president of HFR, told Institutional Investor.

Heinz attributed the newfound surge in launches to three factors: performance, inflation, and risk aversion. According to a statement, the top decile of hedge funds tracked by HFR gained 126.8 percent in the 12-month period ending in the first quarter of 2021. In this quarter alone, the top decile gained 29.7 percent.

Institutional investors are also looking to hedge against inflation, Heinz said. “As the world emerges from the lockdown, inflation is present, and it will continue to build,” he said. “The different strategies provide great protection from inflation.”

These strategies include equity hedge funds and event-driven funds. As of the first quarter of 2021, the greatest portion of industry assets — 30.42 percent — were invested in equity hedge funds. Event-driven funds came in second with 27.53 percent of total industry assets.

Heinz said these particular strategies are appealing to investors because they provide exposure to some hot “meme” stocks. Plus, as the world emerges from a global quarantine, he said there is a large appetite for strategic activity in mergers and acquisitions — a strong point for event-driven funds.

Since the first quarter of 2020 and the onset of the Covid-19 pandemic, Heinz said investors have left their risk complacency in 2019. Heinz said 2019 was a “super beta year,” prompting inventors to worry less about risk and more about returns.

“I liken 2019 to the easiest year in the world to make money because everything went up,” Heinz said. “But then March reminded investors they had become complacent about risk.”

As they move into the new year and recover from the pandemic, investors have taken more defensive positioning against risks that were overlooked in 2019. As for the future of the hedge fund industry, Heinz said he believes the market has entered a period of expansion.

“Even though the markets have recovered and they’ve gone back to record highs, I think institutions that are allocating are still very much more cognizant of risk than they were prior to the first quarter of 2020,” he said. “I think that’s the reason that you’re seeing more capital inflows and more funds launching.”

https://i0.wp.com/onlinemarketingscoops.com/wp-content/uploads/2021/07/Hamlin.jpg?resize=79%2C79&ssl=1

By: Jessica Hamlin

Source: Hedge Fund Launches Are Surging | Institutional Investor

.

Critics:

A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction and risk management techniques in an attempt to improve performance, such as short selling, leverage, and derivatives. Financial regulators generally restrict hedge fund marketing except to institutional investors, high net worth individuals and others who are considered sufficiently sophisticated.

Hedge funds are regarded as alternative investments. Their ability to make more extensive use of leverage and more complex investment techniques distinguishes them from regulated investment funds available to the retail market, such as mutual funds and ETFs. They are also considered distinct from private-equity funds and other similar closed-end funds.

As hedge funds generally invest in relatively liquid assets and are generally open-ended, meaning that they allow investors to invest and withdraw capital periodically based on the fund’s net asset value, whereas private-equity funds generally invest in illiquid assets and only return capital after a number of years. However, other than a fund’s regulatory status there are no formal or fixed definitions of fund types, and so there are different views of what can constitute a “hedge fund”.

The Shareholders Are Not The Owners Of A Corporation

The contention that the shareholders own companies is based, at best, on lack of understanding of the law, of business, and of history. At worst, it is driven by greed, power, and the desire to protect a business governance that has devastated much of America for some 40 years.

Why, you might ask, is the issue of who owns the corporation so vitally important? Because at the heart of the debate between two versions of capitalism lies controversy. One side feels a deep need to protect the interests of the shareholder first and foremost. The other side feels the pain that comes from de-prioritizing the other stakeholders in a corporation – including its employees, customers, and the community in which it lives.

In truth, the shareholder almost certainly will do as well with either version of capitalism. Change is always hard and threatening to those wanting to protect the status quo even if it won’t cost them a thing. But I contend there is a problem with the status quo, with the current version of capitalism, which serves the shareholders well, but has proven to be catastrophic for the vast majority of the American people and detrimental to American competitiveness on the global stage, particularly in our economic rivalry with China.

Further, it is now proving to be a major threat to our democracy. Thus, a change away from shareholder primacy capitalism must be made decisively and with utmost urgency. The defense of the status quo—shareholder primacy governance—rests increasingly on the rationale that the shareholders are the true owners of the corporation and therefore have the right to demand whatever is in their best interest.

But before we blindly adhere to that idea, it is vital we examine these versions of capitalism, the experience the nation has had with each; and why the issue of corporate ownership becomes an important – if not central — consideration.

Capitalism And Its Multiple Versions Of Governance

The ferocious debate in the U.S. today is really between two forms of capitalism. Not of capitalism itself which continues to be the most powerful economic engine ever created by humankind. Capitalism by itself with access to needed resources, including capital, labor, and a sustainable supply chain and embracing the principles of prudent risk taking, wise apportionment of incentives and rewards, and a commitment to practical long-term investment—acts like a brilliant inanimate engine.

It has no ethical or moral components. And that’s why the governance, the rules of engagement, become so very critical. Vitally, governance identifies the beneficiary of this amazing capitalist engine. In China, the capitalism engine is working brilliantly given what China intended. And there, the major beneficiary of much of the value creation goes to the Communist government. In some Nordic European nations, capitalism rewards both shareholders and, through taxes, government projects which provide citizens with some combination of free education and/or free healthcare. Much of Europe, through taxes, has a very elaborate societal safety net. But the engine is still primarily free enterprise capitalism.

Shareholder Primacy Capitalism

In the United States, the governance for the last 40 years has been clearly committed to give the shareholder priority over any other company stakeholders. This is the concept of shareholder primacy every CEO and board director knows: The purpose of business is to maximize short-term shareholder value. Recently, it has been contended that this is fair and just because the shareholders own the company.

The other stakeholders, for the last four decades, became secondary: the customers, the workers, the corporation itself, the vendors, community, the planet. Even in this system, the capitalist engine worked magnificently. As intended, it drove short-term shareholder value to unimaginable wealth and prosperity. The other stakeholders became deprived and exploited. And the guardians of this governance became the financial community which enforced the system with aggressive brutality.

The CEOs and others in the C-suite of top corporations became corrupted by equally unimaginable compensation, as long as they delivered on this shareholder demand. And if they couldn’t or didn’t do it, they were summarily dismissed. If and when the CEOs and boards of directors tried to deviate from this strict behavior, the company was punished by the financial community which has the power to drive down the company’s price in the stock market.

Before the pandemic, Bank of America downgraded Chipotle’s stock because an analyst decided the company was paying its workers too much. As a result, the company’s price declined by 3%. When American Airlines announced pay raises for its pilots and flight attendants, Wall Street punished the company by dropping its stock price 5%. The message sent to the market was clear — workers were to be squeezed and the benefits belong to shareholders. So, for 40 years workers’ wages have been relatively flat sitting at, or often below, inflation.

Lastly, in the past decade, shareholder primacy expanded the intensity of activists who acted like terrorists, blackmailing and terrorizing CEOs and corporate boards alike. Historically, activists have served the business community well. Often, they worked with management to help increase value creation. Occasionally, they did take over the company with intention to hold the stock and capitalize on the inherent, but previously underperforming, value creation.

But this new group of activists employ a different strategy. They take over the company, take out the cash, cut R&D, fire as many people as possible and in the shortest possible time, flipping the company after taking it public or selling the corpse to a strategic buyer. All in the name of maximizing short-term value. Of late, they don’t even have to take over the company. They buy in to the target company and threaten to run their standard play if the company will not “voluntarily” provide that extra short-term value at the expense of all the other stakeholders.

Another brutal tactic to drive shareholder value is the tax efficient practice of stock buybacks. Trillions of dollars have been created to benefit current shareholders in the stock market by reducing the number of available shares. This artificially increased the value of the remaining shares, without creating organic value to the enterprise. This is financial engineering at its best. (Prior to 1982, stock buybacks were illegal and were considered stock manipulation.)

Before the pandemic, 54% of business’ operating profits went to shareholders through stock buybacks and an additional 37% were distributed in dividends. Some 90% of American businesses’ operating profits ended up with shareholders. As a result, 25% of Americans by income, almost all shareholders, came to own close to 98% of the value of the stock market.

In the first four months of 2021, the stock buybacks practice continued and recorded the highest levels in 20 years. And what a negative impact this extraordinary use of operating profits turns out to be. Workers are grossly underpaid. And corporations that used to lead the way by investments in R&D and basic research were starved by this choice. America used to be the leader in technology, transportation, semiconductors, computers, medical science and more.

For example, America invented synthetic biology but now we trail Chinese scientists. And where are we on 5G technology? In a recent interview, Intel CEO Pat Gelsinger cried out, “Our competition is out to eat our lunch. And if we don’t fight for it, every single frickin’ day, we are at risk of losing it.” Government investment support continues to be anemic as well. Simply put, business must step up. Because right now we’re setting stock buyback records. We are world champions at this, indeed.

But the most cruelly treated victims of shareholder primacy were the workers. Their unfair, unjust, and unreasonable wages created a catastrophic microeconomic disaster. It affected families; it created an unequal quality of education which placed American kids at the bottom half of the developed world. It also catapulted America as the most unequal nation with the most immobile society among peer nations. Just one more fact.

Prior to the pandemic, some 60% of American homes had to borrow money most months to put food on the table, or to pay to keep from losing the roof over their heads. So, this is the fallout from the shareholder primacy system. A perverse version of capitalism that the shareholder community today is fighting to protect. And it’s finding some allies in Congress as well, who are the recipients of huge contributions to their reelection campaigns.

Another serious impact of four decades of shareholder primacy is our democratic way of life. The affected Americans are losing hope in our government’s ability to be fair and just. Populist forces have exploited this group and authoritarian forms of government sprang forth in various parts of the world in the last 40 years (Turkey, Hungary, Poland). The same movement has been active and threatening our democratic institutions here in the United States.

This unjust version of capitalism is the driving force that created our vast socio-economic inequality here at home. It must be noted that the most egregiously affected and deprived groups in our society have been the black and brown communities as the Covid-19 pandemic so tragically demonstrated.

But if the shareholders do not own a public corporation, how can one continue to defend such a flawed and damaging form of capitalism? And this is why the question of who owns the corporation becomes an important part of why a better, more just, more balanced form of capitalism is absolutely America’s best choice moving forward.

So, Who Really Owns The Corporation?

Simply and clearly, the corporation owns its own assets. In the simplest terms, a private company became a public company when the original owners gave up ownership. In turn, they received a stock certificate outlining certain rights to profits and other privileges. What they got, again, was a stock certificate not a certificate of ownership. The word “ownership” does not appear in that document.

Additionally, while the shareholders are entitled to a portion of profits, as shareholders, they are no longer exposed to liabilities of the companies in which they hold shares. They are granted, in essence, total immunity! Furthermore, the shareholders can come into a stock whenever they want, and leave when they want (with very, very few exceptions). In today’s world, the stock owner may be a machine and shares may be held in a timeframe of milliseconds.

To me, these facts are ample and logical evidence that preclude a shareholder from being a true owner. Do you know any business “owner” large or small who assumes no risk or liability?  I highly doubt it. Legally, there is no evidence that stakeholders are owners. No law – absolutely none— can be found which states that shareholders own the corporation.

In her 2012 book The Shareholder Value Myth, Lynn Stout, who taught at Cornell University Law School, successfully argued that shareholders don’t own the company – this was the foundational insight of that book. The lie being purveyed was that the law required companies to serve shareholders with as much profit as quickly as possible. She was quick to dispel the notion, citing three core reasons:

  • Directors of public companies aren’t required by law to maximize shareholder value. Companies are formed to conduct legal activities, that’s all, and profit is not a mandatory requirement, though profitability is always an advantage.
  • Directors of a company have full control of it. Shareholders have no legal right to govern the activity of a company for their own benefit. Directors can decide to reduce, not increase share price, if they believe it’s in the best interest of the company itself.
  • Shareholder primacy, where short-term profits are the primary goal, often leads to tragic consequences for the common good.

How prescient Stout’s comments turned out to be.

For those desiring a more in-depth explanation, one can find it in the words of Marty Lipton, arguably one of the most respected iconic stewards of American corporate law. When participating in a roundtable discussion hosted by the American Enterprise Institute, Lipton concludes that the shareholder fundamentally does not own the corporation. In his own words, “I don’t view the shareholders as outright owners of the corporation in a way one would own a house or a car.

They’re investors in the corporation and own the equity, and they are thus important constituents, but they are not the owners of the corporation as a whole. And for that reason the company should not be run solely in the interest of the shareholders.” He adds, “corporations can only exist within the overall umbrella of government and society.” His dispassionate rigor and logic are most convincing.

The full roundtable transcript for those interested is here. Then there’s an “agency” ownership argument. Joseph Bower and Lynn Paine laid that argument to rest in a seminal piece in the Harvard Business Review in 2017. Conclusively, the shareholders are owners of stock in the corporation. They are not the owners of a corporation’s assets. There can be no further, reasonable argument.

The Best Path Forward For Business: Stakeholder Capitalism

Multi-Stakeholder Capitalism was the capitalist governance that started the modern capitalism era in America in 1945. It lasted for some 40 years. During this period, America became the most dominant economic and military nation in the world. In addition, America’s middle class grew to remarkable size and wealth. This group became the world’s largest economic market.

Remarkably, in this 40-year period, the middle class’s value grew more than twice the rate of America’s top one percent (by income). It was a period when most all segments in America saw significant economic progress (a tragic exception was most of the African American community). Business clearly understood the power and meaning of this multi-stakeholder capitalism.

The Johnson & Johnson Credo brilliantly encapsulated this business responsibility in a truly authentic document of historic importance. Thus, multi-stakeholder capitalism is not an experiment. It is a remarkable 40-year demonstration period in our business history. Moving from history to present day relevance, JUST Capital has become the leading not-for-profit organization promoting the adoption of stakeholder capitalism.

(As a disclosure, I serve as a director of JUST Capital.) It ranks the largest 1,000 corporations in America on a “justness” criterion — as defined by the American people via polling —a surrogate for the principles of stakeholder capitalism. The findings are dramatic. Many of the most “just” companies also deliver the greatest return to the shareholders. As I noted earlier, stakeholder capitalism works superbly well in producing long-term shareholder value. Think about it. Workers now receive a proper living wage.

They produce incremental value for the corporation, motivated by sharing in the incremental value they create. The key is that incremental value is now produced. Next, corporations invest more in R&D and Basic Research to compete with China and other nations. The planet will become more livable by their ESG commitments. All these activities in a synergistic and symbiotic way produce that greater long-term value for shareholders. This is what Milton Friedman truly advocated.

It turns out that shareholder primacy and its devastating consequences promptly belong in the dustbin of history. Freed of the false myth of corporate ownership and it’s dangerous governance, stakeholder capitalism opens the door to the entrepreneurial power of a truly free version of capitalism that can lift all boats and create inclusive prosperity for all Americans.

In the end, stakeholder capitalism is one of the essential pillars of a sustainable democracy and the journey to create an equal opportunity for all future generations. That vision is worth the battles we must fight today. So, onwards.

Follow me on Twitter or LinkedIn. Check out my website.

Peter Georgescu is the Chairman Emeritus of Young & Rubicam Inc., a network of preeminent commercial communications companies dedicated to helping clients build their businesses through the power of brands. I served as the company’s Chairman and CEO from 1994 until January 2000. For my contributions to the marketing industry I have been inducted into the Advertising Hall of Fame. I immigrated to the United States from Romania in 1954. I graduated from Exeter Academy, received my B.A. with cum laude honors from Princeton and earned an MBA from the Stanford Business School. In 2006, I published my first book The Source of Success, asserting that personal values and creativity are the leading drivers of business success in the 21st Century. My second book, The Constant Choice, was published in January 2013. My latest book is Capitalists Arise! which deals with the consequences of income inequality and how business must begin to help solve the problem

Source: The Shareholders Are Not The Owners Of A Corporation

.

References:

Individual Retirement Account (IRA) New Account Application

Individual Retirement Account (IRA) New Account Application Individual Retirement Account (IRA) New Account Application ederated The USA PATRIOT Act requires the Funds to obtain, verify, and record information that identifies each person who opens an account. Failure

More information

Eaton Vance Mutual Funds Individual Retirement Account (IRA) Distribution Request Form

Eaton Vance Mutual Funds Individual Retirement Account (IRA) Distribution Request Form Eaton Vance Mutual Funds Eaton Vance Mutual Funds Individual Retirement Account (IRA) Distribution Request Form Return to: Eaton Vance Funds, P.O. Box 9653, Providence, RI 02940 Overnight Mail: Eaton Vance

More information

COVERDELL EDUCATION SAVINGS ACCOUNT APPLICATION

COVERDELL EDUCATION SAVINGS ACCOUNT APPLICATION COVERDELL EDUCATION SAVINGS ACCOUNT APPLICATION IMPORTANT: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain,

More information

SCOTT & WHITE RETIREMENT/401(K) PLAN Plan Number 090337 Plan Information as of 05/16/2015

SCOTT & WHITE RETIREMENT/401(K) PLAN Plan Number 090337 Plan Information as of 05/16/2015 SCOTT & WHITE RETIREMENT/401(K) PLAN Plan Number 090337 Plan Information as of 05/16/2015 This legally required notice includes important information to help you compare the investment options under your

More information

student s name (first, middle initial, last) social security number Date of birth (mm-dd-yyyy)

student s name (first, middle initial, last) social security number Date of birth (mm-dd-yyyy) Artisan Funds Education Savings Account Application Use this application to establish an artisan funds education savings account. there is an acceptance fee of $5.00 and an annual maintenance fee of $15.00.

More information

The Bank of New York Mellon. BuyDIRECTSM. Norfolk Southern Corporation

The Bank of New York Mellon. BuyDIRECTSM. Norfolk Southern Corporation The Bank of New York Mellon BuyDIRECTSM A Direct Purchase and Sale Plan for the Common Stock of Norfolk Southern Corporation THE PLAN AND PARTICIPATION IN THE PLAN IS GOVERNED BY THE PLAN BOOKLET IN ITS

More information

Dividend Reinvestment & Direct Stock Purchase Plan for investors in RPM International Inc.

Dividend Reinvestment & Direct Stock Purchase Plan for investors in RPM International Inc. Shareowner Service Plus Plan SM Investment Brochure Dividend Reinvestment & Direct Stock Purchase Plan for investors in RPM International Inc. CUSIP# 749685 10 3 Sponsored and Administered by: Wells Fargo

More information

IRA Systematic Distribution Form

IRA Systematic Distribution Form IRA Systematic Distribution Form PO Box 55932 Boston, MA 02205-5932 800-525-1093 Use this form to establish systematic distributions from your IRA. Do not use this form for a one-time distribution. Print

More information

Fill in the necessary information corresponding to the account s owner.

Fill in the necessary information corresponding to the account s owner. IRA APPLICATION It s easy to establish your account. Simply fill out this application, completing all relevant sections, sign in ink and return to: Regular Mail FundX Upgrader Funds c/o US Bancorp Fund

More information

TAX ASPECTS OF MUTUAL FUND INVESTING

TAX ASPECTS OF MUTUAL FUND INVESTING Tax Guide for 2015 TAX ASPECTS OF MUTUAL FUND INVESTING INTRODUCTION I. Mutual Fund Distributions A. Distributions From All Mutual Funds 1. Net Investment Income and Short-Term Capital Gain Distributions

More information

How To Liquidate An Ira Account

How To Liquidate An Ira Account Manning & Napier Fund, Inc. Individual Retirement Account (IRA) Distribution Request Form This form is not intended for required minimum distributions, trustee to trustee transfers, recharacterizations,

More information

Individual Retirement Account (IRA) Application

Individual Retirement Account (IRA) Application FPA Funds P.O. Box 2175 Milwaukee, WI 53201 Individual Retirement Account (IRA) Application FPA Capital Fund, Inc. FPA Crescent Fund FPA International Value Fund FPA New Income, Inc. FPA Paramount Fund,

More information

INDIVIDUAL RETIREMENT ACCOUNT (IRA) PERIODIC REQUEST FORM

INDIVIDUAL RETIREMENT ACCOUNT (IRA) PERIODIC REQUEST FORM INDIVIDUAL RETIREMENT ACCOUNT (IRA) PERIODIC REQUEST FORM Use this form to request a periodic distribution or contribution of assets from Traditional IRAs, SEP IRAs, SIMPLE IRAs, Roth IRAs, and Education

More information

Account Application. Step One Account Registration. Institutional Class Shares. Customer Identification Program. What this means for you:

Account Application. Step One Account Registration. Institutional Class Shares. Customer Identification Program. What this means for you: Account Application Institutional Class Shares This application can only be used for initial purchase of the Institutional Class shares of The Royce Funds listed on page 3. It cannot be used to open an

More information

Authorization to Convert a Janus Traditional IRA

Authorization to Convert a Janus Traditional IRA Authorization to Convert a Janus Traditional IRA PO Box 55932 Boston, MA 02205-5932 800-525-1093 Use this form to convert assets from an existing Janus Traditional IRA to a new or existing Janus Roth IRA.

More information

Page 1. 9 Fomento Economico Mexicano,

Page 1. 9 Fomento Economico Mexicano, TABLE OF CONTENTS The Bank of New York Global BuyDIRECT Overview Summary of Plan Services 3 Page 1 Global BuyDIRECT SM Frequently Asked Questions and Answers Contacting the Plan Administrator 4 A Direct

More information

Traditional, Roth, SEP-IRA, or SIMPLE IRA Application

Traditional, Roth, SEP-IRA, or SIMPLE IRA Application Traditional, Roth, SEP-IRA, or SIMPLE IRA Application A fund family of Everence Please call if you have any questions about filling out this application. (800) 977-2947 Send this application, and if applicable,

More information

Financial Advisor New Account Application

Financial Advisor New Account Application Financial Advisor New Account Application For Trusts, Partnerships, Corporations, Estates, or Other Entities Complete this application to establish an account for a trust, partnership, corporation, estate,

More information

Future Scholar welcome guide

Future Scholar welcome guide Future Scholar welcome guide New account information futurescholar.com 888.244.5674 Monday Friday, 8:00 a.m. 8:00 p.m. Eastern Curtis M. Loftis, Jr. State Treasurer State of South Carolina A message from

More information

Investment Change Form

Investment Change Form BRIGHT START COLLEGE SAVINGS Investment Change Form Investing Through a Financial Professional Instructions Print clearly in all CAPITAL LETTERS using blue or black ink. When requested, please color in

More information

RBC Funds – Class A IRA Application For Traditional, ROTH, SEP, and SIMPLE IRAs

RBC Funds - Class A IRA Application For Traditional, ROTH, SEP, and SIMPLE IRAs RBC Funds – Class A IRA Application For Traditional, ROTH, SEP, and SIMPLE IRAs >> Mail to: RBC Funds c/o U.S. Bancorp Fund Services, LLC PO Box 701 Milwaukee, WI 53201-0701 Overnight Express Mail To:

More information

Verizon Communications

Verizon Communications A Direct Stock Purchase and Share Ownership Plan for Common Stock, $.10 par value per share, of Verizon Communications Inc. Verizon Communications Direct Invest Purchase Verizon shares conveniently. Build

More information

A User s Guide to Self-directed Brokerage Accounts (SDAs) From Retirement Brokerage Services

A User s Guide to Self-directed Brokerage Accounts (SDAs) From Retirement Brokerage Services A User s Guide to Self-directed Brokerage Accounts (SDAs) From Retirement Brokerage Services Table of Contents Introduction Managing Your Self-directed Brokerage Account (SDA) Funding Your SDA pg. 3 Transferring

More information

USAA NEW YORK MONEY MARKET FUND SUPPLEMENT DATED APRIL 1, 2016 TO THE FUND’S PROSPECTUS DATED AUGUST 1, 2015

USAA NEW YORK MONEY MARKET FUND SUPPLEMENT DATED APRIL 1, 2016 TO THE FUND'S PROSPECTUS DATED AUGUST 1, 2015 USAA NEW YORK MONEY MARKET FUND SUPPLEMENT DATED APRIL 1, 2016 TO THE FUND’S PROSPECTUS DATED AUGUST 1, 2015 This Supplement updates certain information contained in the above-dated prospectus for the

More information

AMG FUNDS SIMPLE INDIVIDUAL RETIREMENT ACCOUNT (IRA) DISTRIBUTION REQUEST FORM

AMG FUNDS SIMPLE INDIVIDUAL RETIREMENT ACCOUNT (IRA) DISTRIBUTION REQUEST FORM AMG FUNDS SIMPLE INDIVIDUAL RETIREMENT ACCOUNT (IRA) DISTRIBUTION REQUEST FORM This form is not intended for required minimum distributions, trustee to trustee transfers or conversion requests. I. PARTICIPANT

More information

Self-Direct Brokerage

Self-Direct Brokerage Self-Direct Brokerage sdb Direct Advantage sdb Advisor Advantage Your employer is pleased to offer the Self-Direct Brokerage (sdb) service. An sdb account gives you more flexibility in managing your retirement

More information

SEP-IRA New Account Application ederated

SEP-IRA New Account Application ederated SEP-IRA New Account Application ederated The USA PATRIOT Act requires Federated to obtain, verify, and record information that identifies each person who opens an account. Failure to provide required information

More information

Frequently Asked Questions Individual Retirement Accounts

Frequently Asked Questions Individual Retirement Accounts Frequently Asked Questions Individual Retirement Accounts What is an IRA? IRA stands for Individual Retirement Arrangement. An IRA is a taxed deferred vehicle used to set aside assets for retirement. What

More information

Individual Retirement Account (IRA) New Account Application

Individual Retirement Account (IRA) New Account Application Individual Retirement Account (IRA) New Account Application ederated The USA PATRIOT Act requires the Funds to obtain, verify, and record information that identifies each person who opens an account. Failure

More information

Prospectus. Dominion Direct 11,000,000 Shares of Common Stock (Without Par Value) (NYSE: D)

Prospectus. Dominion Direct 11,000,000 Shares of Common Stock (Without Par Value) (NYSE: D) Prospectus Dominion Direct 11,000,000 Shares of Common Stock (Without Par Value) (NYSE: D) March 7, 2014 Dominion Resources, Inc. Investing in Dominion Common Stock involves risks. For information about

More information

IRA DISTRIBUTION REQUEST

IRA DISTRIBUTION REQUEST IRA DISTRIBUTION REQUEST Additional Copies or Assistance If you need additional copies of this application, or would like assistance completing it, please call Nuveen Investments at 800.257.8787 or go

More information

SOURCE CAPITAL, INC.

SOURCE CAPITAL, INC. SOURCE CAPITAL, INC. DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN A Dividend Reinvestment and Direct Stock Purchase Plan ( Plan ) is available to all record holders of Common Stock of Source Capital,

More information

STEP 1 PARTICIPANT INFORMATION STEP 2 REASON FOR DISTRIBUTION. A. Your Information

STEP 1 PARTICIPANT INFORMATION STEP 2 REASON FOR DISTRIBUTION. A. Your Information Instructions Fidelity Investments Distribution Form Before you complete the Fidelity Investments Distribution Form, please read the following instructions. Each item listed below corresponds with the steps

More information

NEW ACCOUNT TUTORIAL ACCOUNT TYPE

NEW ACCOUNT TUTORIAL ACCOUNT TYPE NEW ACCOUNT TUTORIAL The following tutorial provides general information about opening an account online. If you have any questions about the Fund s Online Account Application, please call the fund s toll

More information

IRA Application For Traditional, ROTH, SEP, and SIMPLE IRAs

IRA Application For Traditional, ROTH, SEP, and SIMPLE IRAs IRA Application For Traditional, ROTH, SEP, and SIMPLE IRAs >> Mail to: Aegis Funds c/o U.S. Bancorp Fund Services, LLC PO Box 701 Milwaukee, WI 53201-0701 Overnight Express Mail To: Aegis Funds c/o U.S.

More information

Fidelity Investments Registered Investment Advisor Authorization Form

Fidelity Investments Registered Investment Advisor Authorization Form This Authorization Form may be used to do the following: Fidelity Investments Registered Investment Advisor Authorization Form For Plan Participants: 1. Authorize Fidelity Investments ( Fidelity ) to provide

More information

TSYS Dividend Reinvestment and Direct Stock Purchase Plan

TSYS Dividend Reinvestment and Direct Stock Purchase Plan Prospectus Supplement dated September 4, 2012 Filed pursuant to Rule 424(b)(3) To Prospectus dated November 10, 2011 File No. 333-177897 TSYS Dividend Reinvestment and Direct Stock Purchase Plan This is

More information

Check here if you are establishing this Account in connection with a SIMPLE IRA plan maintained by your employer.

Check here if you are establishing this Account in connection with a SIMPLE IRA plan maintained by your employer. LEGG MASON FUNDS 1 BNY Mellon Investment Servicing Trust Company SIMPLE Individual Retirement Custodial Account Application and Adoption Agreement This application should be used to open a SIMPLE IRA investing

More information

PG&E Corporation Dividend Reinvestment and Stock Purchase Plan

PG&E Corporation Dividend Reinvestment and Stock Purchase Plan Prospectus PG&E Corporation Dividend Reinvestment and Stock Purchase Plan 1,821,465 shares of PG&E Corporation common stock, no par value This prospectus describes the PG&E Corporation Dividend Reinvestment

More information

QUESTIONS AND ANSWERS CONCERNING EXCHANGING WYETH COMMON STOCK. 3. What is the value of my of merger consideration?

QUESTIONS AND ANSWERS CONCERNING EXCHANGING WYETH COMMON STOCK. 3. What is the value of my of merger consideration? QUESTIONS AND ANSWERS CONCERNING EXCHANGING WYETH COMMON STOCK Tax-Related: 1. Since the transaction is fully taxable, how will the Company report my merger consideration for tax purposes? The Company

More information

Understanding Your Brokerage Account Statements

Understanding Your Brokerage Account Statements Understanding Your Brokerage Account Statements Understanding Your Brokerage Account Statements North American Securities Administrators Association, Inc.? What can my statement tell me? INTRODUCTION How

More information

GENERAL GROWTH PROPERTIES, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

GENERAL GROWTH PROPERTIES, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN GENERAL GROWTH PROPERTIES, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Plan Sponsored by General Growth Properties, Inc. and Administered by Mellon Bank, N.A. not by General Growth Properties, Inc.

More information

IRA ADOPTION AGREEMENT

IRA ADOPTION AGREEMENT IRA ADOPTION AGREEMENT Please complete and sign this IRA Adoption Agreement after you have read the prospectus carefully. You may invest in as many of the UMB Scout Funds as you wish using just this application.

More information

A. Current account owner(s) Complete section 2, you may need to obtain a Medallion Guarantee. B. New account owner(s) Complete sections 3 through 10.

A. Current account owner(s) Complete section 2, you may need to obtain a Medallion Guarantee. B. New account owner(s) Complete sections 3 through 10. Non-Retirement Accounts N 1 Instructions Overview FOR ASSISTANCE with this form, call Shareholder Services at (800) 662-0201, or the Timothy Plan at (800) 846-7526. SIGNATURE GUARANTEE: For gifts over

More information

IRA Application. Class C and S Shares

IRA Application. Class C and S Shares IRA Application Class C and S Shares Instructions Use this form for IRA individual, custodial, trust,profit-sharing and pension plan accounts. Do not use this form for ICON Funds Class A accounts. For

More information

Inheriting an IRA Individual Beneficiary Checklist

Inheriting an IRA Individual Beneficiary Checklist Inheriting an IRA Individual Beneficiary Checklist PO Box 55932 Boston, MA 02205-5932 800-240-4313 Re-registration Requirements Completed Janus IRA Beneficiary Claim Form Individual Beneficiary Certified

More information

If you have any questions or need assistance, please do not hesitate to contact us at 800.292.7435.

If you have any questions or need assistance, please do not hesitate to contact us at 800.292.7435. Thank you for choosing to roll over your retirement plan (e.g., 401k, 403b, 457) assets to an Ariel Investments IRA. Please take the steps outlined below to complete the roll over process. 1. If you do

More information

Retail Sales For June Provide An Early Boost, But Bond Yields Mostly Calling The Shots

Getty Images

The first week of earnings season wraps up with major indices closely tracking the bond market in Wall Street’s version of “follow the leader.” Earnings absolutely matter, but right now the Fed’s policies are maybe a bigger influence. In the short-term the Fed is still the girl everyone wants to dance with.

Lately, you can almost guess where stocks are going just by checking the 10-year Treasury yield, which often moves on perceptions of what the Fed might have up its sleeve. The yield bounced back from lows this morning to around 1.32%, and stock indices climbed a bit in pre-market trading. That was a switch from yesterday when yields fell and stocks followed suit. Still, yields are down about six basis points since Monday, and stocks are also facing a losing week.

It’s unclear how long this close tracking of yields might last, but maybe a big flood of earnings due next week could give stocks a chance to act more on fundamental corporate news instead of the back and forth in fixed income. Meanwhile, retail sales for June this morning basically blew Wall Street’s conservative estimates out of the water, and stock indices edged up in pre-market trading after the data.

Headline retail sales rose 0.6% compared with the consensus expectation for a 0.6% decline, and with automobiles stripped out, the report looked even stronger, up 1.3% vs. expectations for 0.3%. Those numbers are incredibly strong and show the difficulty analysts are having in this market. The estimates missed consumer strength by a long shot. However, it’s also possible this is a blip in the data that might get smoothed out with July’s numbers. We’ll have to wait and see.

Caution Flag Keeps Waving

Yesterday continued what feels like a “risk-off” pattern that began taking hold earlier in the week, but this time Tech got caught up in the selling, too. In fact, Tech was the second-worst performing sector of the day behind Energy, which continues to tank on ideas more crude could flow soon thanks to OPEC’s agreement.

We already saw investors embracing fixed income and “defensive” sectors starting Tuesday, and Thursday continued the trend. When your leading sectors are Utilities, Staples, Real Estate, the way they were yesterday, that really suggests the surging bond market’s message to stocks is getting read loudly and clearly.

This week’s decline in rates also isn’t necessarily happy news for Financial companies. That being said, the Financials fared pretty well yesterday, with some of them coming back after an early drop. It was an impressive performance and we’ll see if it can spill over into Friday.

Energy helped fuel the rally earlier this year, but it’s struggling under the weight of falling crude prices. Softness in crude isn’t guaranteed to last—and prices of $70 a barrel aren’t historically cheap—but crude’s inability to consistently hold $75 speaks a lot. Technically, the strength just seems to fade up there. Crude is up slightly this morning but still below $72 a barrel.

Losing Steam?

All of the FAANGs lost ground yesterday after a nice rally earlier in the week. Another key Tech name, chipmaker Nvidia (NVDA), got taken to the cleaners with a 4.4% decline despite a major analyst price target increase to $900. NVDA has been on an incredible roll most of the year.

This week’s unexpectedly strong June inflation readings might be sending some investors into “flight for safety” mode, though no investment is ever truly “safe.” Fed Chairman Jerome Powell sounded dovish in his congressional testimony Wednesday and Thursday, but even Powell admitted he hadn’t expected to see inflation move this much above the Fed’s 2% target.

Keeping things in perspective, consider that the S&P 500 Index (SPX) did power back late Thursday to close well off its lows. That’s often a sign of people “buying the dip,” as the saying goes. Dip-buying has been a feature all year, and with bond yields so low and the money supply so huge, it’s hard to argue that cash on the sidelines won’t keep being injected if stocks decline.

Two popular stocks that data show have been popular with TD Ameritrade clients are Apple (AAPL) and Microsoft (MSFT), and both of them have regularly benefited from this “dip buying” trend. Neither lost much ground yesterday, so if they start to rise today, consider whether it reflects a broader move where investors come back in after weakness. However, one day is never a trend.

Reopening stocks (the ones tied closely to the economy’s reopening like airlines and restaurants) are doing a bit better in pre-market trading today after getting hit hard yesterday.

In other corporate news today, vaccine stocks climbed after Moderna (MRNA) was added to the S&P 500. BioNTech (BNTX), which is Pfizer’s (PFE) vaccine partner, is also higher. MRNA rose 7% in pre-market trading.

Strap In: Big Earnings Week Ahead

Earnings action dies down a bit here before getting back to full speed next week. Netflix (NFLX), American Express (AXP), Johnson & Johnson (JNJ), United Airlines (UAL), AT&T (T), Verizon (VZ), American Airlines (AAL) and Coca-Cola (KO) are high-profile companies expected to open their books in the week ahead.

It could be interesting to hear from the airlines about how the global reopening is going. Delta (DAL) surprised with an earnings beat this week, but also expressed concerns about high fuel prices. While vaccine rollouts in the U.S. have helped open travel back up, other parts of the globe aren’t faring as well. And worries about the Delta variant of Covid don’t seem to be helping things.

Beyond the numbers that UAL and AAL report next week, the market may be looking for guidance from their executives about the state of global travel as a proxy for economic health. DAL said travel seems to be coming back faster than expected. Will other airlines see it the same way? Earnings are one way to possibly find out.Even with the Delta variant of Covid gaining steam, there’s no doubt that at least in the U.S, the crowds are back for sporting events.

For example, the baseball All-Star Game this week was packed. Big events like that could be good news for KO when it reports earnings. PepsiCo (PEP) already reported a nice quarter. We’ll see if KO can follow up, and whether its executives will say anything about rising producer prices nipping at the heels of consumer products companies.

Confidence Game: The 10-year Treasury yield sank below 1.3% for a while Thursday but popped back to that level by the end of the day. It’s now down sharply from highs earlier this week. Strength in fixed income—yields fall as Treasury prices climb—often suggests lack of confidence in economic growth.

Why are people apparently hesitant at this juncture? It could be as simple as a lack of catalysts with the market now at record highs. Yes, bank earnings were mostly strong, but Financial stocks were already one of the best sectors year-to-date, so good earnings might have become an excuse for some investors to take profit. Also, with earnings expectations so high in general, it takes a really big beat for a company to impress.

Covid Conundrum: Anyone watching the news lately probably sees numerous reports about how the Delta variant of Covid has taken off in the U.S. and case counts are up across almost every state. While the human toll of this virus surge is certainly nothing to dismiss, for the market it seems like a bit of an afterthought, at least so far. It could be because so many of the new cases are in less populated parts of the country, which can make it seem like a faraway issue for those of us in big cities. Or it could be because so many of us are vaccinated and feel like we have some protection.

But the other factor is numbers-related. When you hear reports on the news about Covid cases rising 50%, consider what that means. To use a baseball analogy, if a hitter raises his batting average from .050 to .100, he’s still not going to get into the lineup regularly because his average is just too low. Covid cases sank to incredibly light levels in June down near 11,000 a day, which means a 50% rise isn’t really too huge in terms of raw numbers and is less than 10% of the peaks from last winter. We’ll be keeping an eye on Covid, especially as overseas economies continue to be on lockdowns and variants could cause more problems even here. But at least for now, the market doesn’t seem too concerned.

Dull Roar: Most jobs that put you regularly on live television in front of millions of viewers require you to be entertaining. One exception to that rule is the position held by Fed Chairman Jerome Powell. It’s actually his job to be uninteresting, and he’s arguably very good at it. His testimony in front of the Senate Banking Committee on Thursday was another example, with the Fed chair staying collected even as senators from both sides of the aisle gave him their opinions on what the Fed should or shouldn’t do. The closely monitored 10-year Treasury yield stayed anchored near 1.33% as he spoke.

Even if Powell keeps up the dovishness, you can’t rule out Treasury yields perhaps starting to rise in coming months if inflation readings continue hot and investors start to lose faith in the Fed making the right call at the right time. Eventually people might start to demand higher premiums for taking on the risk of buying bonds. The Fed itself, however, could have something to say about that.

It’s been sopping up so much of the paper lately that market demand doesn’t give you the same kind of impact it might have once had. That’s an argument for bond prices continuing to show firmness and yields to stay under pressure, as we’ve seen the last few months. Powell, for his part, showed no signs of being in a hurry yesterday to lift any of the stimulus.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

Follow me on Twitter.

I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.

Source: Retail Sales For June Provide An Early Boost, But Bond Yields Mostly Calling The Shots

.

Critics:

Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit. Retailers satisfy demand identified through a supply chain. The term “retailer” is typically applied where a service provider fills the small orders of many individuals, who are end-users, rather than large orders of a small number of wholesale, corporate or government clientele. Shopping generally refers to the act of buying products.

Sometimes this is done to obtain final goods, including necessities such as food and clothing; sometimes it takes place as a recreational activity. Recreational shopping often involves window shopping and browsing: it does not always result in a purchase.

Most modern retailers typically make a variety of strategic level decisions including the type of store, the market to be served, the optimal product assortment, customer service, supporting services and the store’s overall market positioning. Once the strategic retail plan is in place, retailers devise the retail mix which includes product, price, place, promotion, personnel, and presentation.

In the digital age, an increasing number of retailers are seeking to reach broader markets by selling through multiple channels, including both bricks and mortar and online retailing. Digital technologies are also changing the way that consumers pay for goods and services. Retailing support services may also include the provision of credit, delivery services, advisory services, stylist services and a range of other supporting services.

Retail shops occur in a diverse range of types of and in many different contexts – from strip shopping centres in residential streets through to large, indoor shopping malls. Shopping streets may restrict traffic to pedestrians only. Sometimes a shopping street has a partial or full roof to create a more comfortable shopping environment – protecting customers from various types of weather conditions such as extreme temperatures, winds or precipitation. Forms of non-shop retailing include online retailing (a type of electronic-commerce used for business-to-consumer (B2C) transactions) and mail order

China’s Slowing V-Shaped Economic Recovery Sends Global Warning

China’s V-shaped economic rebound from the Covid-19 pandemic is slowing, sending a warning to the rest of world about how durable their own recoveries will prove to be.

The changing outlook was underscored Friday when the People’s Bank of China cut the amount of cash most banks must hold in reserve in order to boost lending. While the PBOC said the move isn’t a renewed stimulus push, the breadth of the 50 basis-point cut to most banks reserve ratio requirement came as a surprise.

Data on Thursday is expected to show growth eased in the second quarter to 8% from the record gain of 18.3% in the first quarter, according to a Bloomberg poll of economists. Key readings of retail sales, industrial production and fixed asset investment are all set to moderate too.

The PBOC’s swift move to lower banks’ RRR is one way of making sure the recovery plateaus from here, rather then stumbles.

The economy was always expected to descend from the heights hit during its initial rebound and as last year’s low base effect washes out. But economists say the softening has come sooner than expected, and could now ripple across the world.

“There is no doubt that the impact of a slowing China on the global economy will be bigger than it was five years ago,” said Rob Subbaraman, head of global markets research at Nomura Holdings Inc. “China’s ‘first-in, first-out’ status from Covid-19 could also influence market expectations that if China’s economy is cooling now, others will soon follow.”

Group of 20 finance ministers meeting in Venice on Saturday signaled alarm over threats that could derail a fragile global recovery, saying new variants of the coronavirus and an uneven pace of vaccination could undermine a brightening outlook for the world economy. China’s state media also cited several analysts Monday saying domestic growth will slow in the second half because of an uncertain global recovery.

China’s slowing recovery also reinforces the view that factory inflation has likely peaked and commodity prices could moderate further.

“China’s growth slowdown should mean near-term disinflation pressures globally, particularly on demand for industrial metals and capital goods,” said Wei Yao, chief economist for the Asia Pacific at Societe Generale SA.

The changing outlook reflects the advanced stage of China’s recovery as growth stabilizes, according to Bloomberg Economics.

What Bloomberg Economics Says…

“Looking through the data distortions, the recovery is maturing, not stumbling. Activity and trade data for June will likely paint a similar picture — a slower, but still-solid expansion.”

— The Asia Economist Team

For the full report, click here.

Domestically, the big puzzle continues to be why retail sales are still soft given the virus remains under control. It’s likely that sales slowed again in June, according to Bloomberg Economics, as sentiment was weighed by controls to contain sporadic outbreaks of the virus.

Even with the PBOC’s support for small and mid-sized businesses, there’s no sign of a broad reversal in the disciplined stimulus approach authorities have taken since the crisis began.

The RRR cut was partially to “manage expectations” ahead of the second-quarter economic data this week, said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong.

“It also provides more policy room going forward, as the momentum of the economic recovery has surely slowed.”

— With assistance by Enda Curran, Yujing Liu, and Bihan Chen

Source: China’s Slowing V-Shaped Economic Recovery Sends Global Warning – Bloomberg

.

Critics:

The Chinese economic reform or reform and opening-up; known in the West as the Opening of China is the program of economic reforms termed “Socialism with Chinese characteristics” and “socialist market economy” in the People’s Republic of China (PRC). Led by Deng Xiaoping, often credited as the “General Architect”, the reforms were launched by reformists within the Chinese Communist Party (CCP) on December 18, 1978 during the “Boluan Fanzheng” period.

The reforms went into stagnation after the military crackdown on 1989 Tiananmen Square protests, but were revived after Deng Xiaoping’s Southern Tour in 1992. In 2010, China overtook Japan as the world’s second-largest economy.

Before the reforms, the Chinese economy was dominated by state ownership and central planning. From 1950 to 1973, Chinese real GDP per capita grew at a rate of 2.9% per year on average,[citation needed] albeit with major fluctuations stemming from the Great Leap Forward and the Cultural Revolution.

This placed it near the middle of the Asian nations during the same period, with neighboring capitalist countries such as Japan, South Korea and rival Chiang Kai-shek‘s Republic of China outstripping the PRC’s rate of growth. Starting in 1970, the economy entered into a period of stagnation, and after the death of CCP Chairman Mao Zedong, the Communist Party leadership turned to market-oriented reforms to salvage the failing economy.

Citation:

Asia Becomes Epicenter of Market Fears Over Slowdown in Growth

Asia is emerging as the epicenter for investor worries over global growth and the spread of coronavirus variants. While their peers in the U.S. and Europe remain near record highs, Asian stocks have fallen back in recent months amid slowing Chinese economic growth and a glacial rollout of vaccines. The trend accelerated Friday with the benchmark MSCI Asia Pacific Index briefly erasing year-to-date gains for the second time in as many months.

“Asia was seen as the poster child in pandemic response last year, but this year the slow vaccination rollout in most countries combined with the arrival of the delta variant means another lost year,” said Mark Matthews, head of Asia research with Bank Julius Baer & Co. in Singapore. “I suspect Asia will continue to lag as long as vaccination rollouts remain at their relatively sluggish levels and high daily new Covid counts prevent them from lifting mobility restrictions.”

The growing jitters in the region comes as investor concerns shift from runaway inflation to an early withdrawal of stimulus by central banks. China’s authorities signaled earlier this week they may soon unleash more support for the economy, suggesting the world’s fastest-pandemic recovery may be weaker than it appears.

A fresh regulatory crackdown on Chinese tech stocks this week has also impacted investor sentiment in the region. The Hang Seng China Enterprises Index fell briefly into a technical bear market Friday, led by weakness in the sector.

While Asia bore the brunt of the retreat in global equities, havens in other asset classes from Treasuries to the yen have rallied, and the rotation toward economically-sensitive cyclical stocks from their high-priced growth counterparts continued to unwind.

“It’s a sign of how challenging the reopening process is,” Marvin Loh, State Street senior global market strategist, said in an interview with Bloomberg TV. “What the PBOC is going through as well as these variants that keep popping up around the world shows it’s going to be an uneven process. Maybe a normalization tightening policy is not necessarily going to be as fluid.”

Covid Challenge

Covid 19 remains a key challenge. In Japan, Tokyo has declared a renewed state of emergency to combat the resurgent virus, banning spectators from the Olympics and pushing the Nikkei 225 Stock Average toward a correction. South Korea is intensifying social distancing measures in Seoul while Indonesia is battling a virus resurgence that has crippled its health system.

“Asian equities are being particularly impacted by the rebound in coronavirus cases in the region, fears about the impact of that on regional growth and concern that we may now have seen the best of the rebound globally,” said Shane Oliver, head of investment strategy with AMP Capital Investors in Sydney. “Asian shares may have led the way on this but coronavirus concerns may also weigh on global shares generally.”

For the APAC region, recent trade deals will likely invigorate and deepen economic integration over the coming few years. In late 2020, China, Japan, South Korea, Australia, New Zealand and 10 Association of Southeast Asian Nations (ASEAN) members signed the Regional Comprehensive Economic Partnership (RCEP) agreement after eight years of negotiation.

When fully implemented in 2022, RCEP will represent the world’s biggest trading bloc, covering about 30% of global GDP and trade. In addition, China concluded a Comprehensive Agreement on Investment (CAI) with the EU on the last day of 2020. The EU is China’s second-largest trading partner and the CAI will cover broad market access, including to key sectors such as alternative energy vehicles and medical services.

Although these trade deals will not have an immediate economic impact, in the medium term the treaties should cement Asia as the world’s most dynamic economic bloc embracing free trade, investment and globalization. They should also help to counter the disruptive geopolitical tensions and encourage the post-pandemic economic recovery in Asia.

.
Critics:
The economy of Asia comprises more than 4.5 billion people (60% of the world population) living in 49 different nations. Asia is the fastest growing economic region, as well as the largest continental economy by both GDP Nominal and PPP in the world. Moreover, Asia is the site of some of the world’s longest modern economic booms, starting from the Japanese economic miracle (1950–1990), Miracle on the Han River (1961–1996) in South Korea, economic boom (1978–2013) in China, Tiger Cub Economies (1990–present) in Indonesia, Malaysia, Thailand, Philippines, and Vietnam, and economic boom in India (1991–present).
 
As in all world regions, the wealth of Asia differs widely between, and within, states. This is due to its vast size, meaning a huge range of different cultures, environments, historical ties and government systems. The largest economies in Asia in terms of PPP gross domestic product (GDP) are China, India, Japan, Indonesia, Turkey, South Korea, Saudi Arabia, Iran, Thailand and Taiwan and in terms of nominal gross domestic product (GDP) are China, Japan, India, South Korea, Indonesia, Saudi Arabia, Turkey, Taiwan, Thailand and Iran.
 
East Asian and ASEAN countries generally rely on manufacturing and trade (and then gradually upgrade to industry and commerce), and incrementally building on high-tech industry and financial industry for growth, countries in the Middle East depend more on engineering to overcome climate difficulties for economic growth and the production of commodities, principally Sweet crude oil.
 
Over the years, with rapid economic growth and large trade surplus with the rest of the world, Asia has accumulated over US$8.5 trillion of foreign exchange reserves – more than half of the world’s total, and adding tertiary and quaterny sectors to expand in the share of Asia‘s economy.

References

 

 

 

 

 

US Jobs Report June 2021: Payrolls Jump 850,000, Unemployment Rate at 5.9%

The pace of U.S. hiring accelerated in June, with payrolls increasing by the most in 10 months, suggesting firms are having greater success recruiting workers to keep pace with the economy’s reopening.

Nonfarm payrolls jumped by 850,000 last month, bolstered by strong job gains in leisure and hospitality, a Labor Department report showed Friday. The unemployment rate edged up to 5.9% because more people voluntarily left their jobs and the number of job seekers rose.

The median estimate in a Bloomberg survey of economists was for a 720,000 rise in June payrolls. “Things are picking up,” said Nick Bunker, an economist at the job-search company Indeed. “While labor supply may not be as responsive as some employers might like, they are adding jobs at an increasing rate.”

The gain in payrolls, while well above expectations, doesn’t markedly raise pressure on the Federal Reserve to pare monetary policy support for the economy. Even with the latest advance, U.S. payrolls are still 6.76 million below their pre-pandemic level.

Demand for labor remains robust as employers strive to keep pace with a firming economy, fueled by the lifting of restrictions on business and social activity, mass vaccinations and trillions of dollars in federal relief.

Read more: Black Men’s Labor Force Rises to Largest Ever Amid Recovery

At the same time, a limited supply of labor continues to beleaguer employers, with the number of Americans on payrolls still well below pre-pandemic levels.

Coronavirus concerns, child-care responsibilities and expanded unemployment benefits are all likely contributing to the record number of unfilled positions. Those factors should abate in the coming months though, supporting future hiring.

Wage growth is also picking up as businesses raise pay to attract candidates. The June jobs report showed a hefty 2.3% month-over-month increase in non-supervisory workers’ average hourly earnings in the leisure and hospitality industry. Overall average earnings rose 0.3% last month.

“The strength of our recovery is helping us flip the script,” Biden said in remarks Friday. “Instead of workers competing with each other for jobs that are scarce, employers are competing with each other to attract workers.”

The Labor Department’s figures showed a 343,000 increase in leisure and hospitality payrolls, a sector that’s taking longer to recover because of the pandemic.

Job growth last month was also bolstered by a 188,000 gain in government payrolls. State and local government education employment rose about 230,000, boosted by seasonal adjustments to offset the typical declines seen at the end of the school year.

Hiring was relatively broad-based in June, including other notable gains in business services and retail trade. However, construction payrolls dropped for a third straight month and manufacturing employment rose less than forecast.

“Most of the new jobs now being created are in sectors that were slammed by the pandemic, while companies in other industries are struggling to find available workers,” Sal Guatieri, senior economist at BMO Capital Markets, said in a note.

Read More

The overall participation rate held steady and remained well short of pre-pandemic levels. The employment population ratio, or the share of the population that’s currently working, was also unchanged.

Digging Deeper

  • Average weekly hours decreased to 34.7 hours from 34.8
  • The participation rate for women age 25 to 54 rose by 0.4 percentage point; the rate among men in that age group also climbed
  • The number of Americans classified as long-term unemployed, or those who have been unemployed for 27 weeks or more, increased by the most since November
  • The U-6 rate, also known as the underemployment rate, fell to a pandemic low of 9.8%. The broad measure includes those who are employed part-time for economic reasons and those who have stopped looking for a job because they are discouraged about their job prospects

Stocks opened higher and Treasury securities fluctuated after the report.

 

By and

Source: US Jobs Report June 2021: Payrolls Jump 850,000, Unemployment Rate at 5.9% – Bloomberg

.

Critics:

The labor force is the actual number of people available for work and is the sum of the employed and the unemployed. The U.S. labor force reached a high of 164.6 million persons in February 2020, just at the start of the COVID-19 pandemic in the United States. The U.S. labor force has risen each year since 1960, with the exception of the period following the Great Recession, when it remained below 2008 levels from 2009-2011.

The labor force participation rate, LFPR (or economic activity rate, EAR), is the ratio between the labor force and the overall size of their cohort (national population of the same age range). Much as in other countries in the West, the labor force participation rate in the U.S. increased significantly during the later half of the 20th century, largely because of women entering the workplace in increasing numbers. Labor force participation has declined steadily since 2000, primarily because of the aging and retirement of the Baby Boom generation.

Analyzing labor force participation trends in the prime working age (25-54) cohort helps separate the impact of an aging population from other demographic factors (e.g., gender, race, and education) and government policies. The Congressional Budget Office explained in 2018 that higher educational attainment is correlated with higher labor force participation for workers aged 25–54. Prime-aged men tend to be out of the labor force because of disability, while a key reason for women is caring for family members.

The Congressional Budget Office explained in 2018 higher educational attainment is correlated with higher labor force participation. Prime-aged men tend to be out of the labor force due to disability, while a key reason for women is caring for family members. To the extent an aging population requires the assistance of prime-aged family members at home, this also presents a downward pressure on this cohort’s participation.

See also

Five Things You Need to Know to Start Your Day

Delta fears are growing, central banks face challenges and the shape of the U.K. and Europe post-Brexit continues to form. Here’s what’s moving markets.

Delta Fears

Concern about the more contagious Delta coronavirus variant is growing and those fears helped fuel a rise in Moderna shares to a record high after the drugmaker said its vaccine produces protective antibodies against the strain. The medicine was approved for restricted emergency use in India, where little more than 4% of the population is so far fully vaccinated. The variant is rippling through emerging markets, with more curbs in Indonesia and warnings of a potentially “catastrophic” wave in Kenya. A widening gap in vaccination rates in the U.S. also shows the risks faces to certain regions.

Policy Challenges

The major challenge for central banks is going to be how to wean the global economy off the unprecedented support they have deployed to deal with the disruption Covid-19 has caused. U.S. and European confidence data is soaring, underlining the rebound the economy is experiencing, while China’s central bank has also struck a more positive tone. Some more data points will arrive for policymakers to mull over on Wednesday, led by U.K. GDP and European inflation numbers.

Brexit Shifts

Paris is JPMorgan’s new trading center in the European Union post-Brexit as the U.S. banking giant inaugurated a new headquarters in the French capital. It is a victory for France in the ongoing race with other European countries to lure business from London after the referendum to leave the EU. It comes as the U.K. government unveiled a system of overseeing subsidies to companies, promising “more agile” decisions. And the U.K. is expecting to reach a truce in the so-called “sausage wars’’ with the EU over post-Brexit trading rules in Northern Ireland.

OPEC+ Delay

OPEC and its allies have delayed preliminary talks for a day to create more time to find a compromise on oil-output increases. It comes with crude oil prices on track for the best half of a year since 2009. Surging commodity prices are creating all sorts of headaches for policy makers, from rising inflation expectations that could move the hand of central bankers to a higher cost in shifting to more sustainable energy sources. This has initially led to a surge in profit for commodity trading houses but will end up hitting consumers down the road through higher prices.

Asian stocks mostly rose following a record close in the U.S. on signs that vaccines can protect against the delta variant of the coronavirus. European and U.S. stock futures are steady. The earnings calendar is relatively thin but watch for the reaction to two long-running takeover sagas moving toward a conclusion.

EssilorLuxottica, the eyewear giant, decided to go ahead with the acquisition of smaller peer GrandVision and the board of France’s Suez has backed its takeover by rival Veolia. And the Organization for Economic Cooperation and Development meets in Paris to finalize plans to overhaul the global minimum corporate tax.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours. 

And finally, here’s what Cormac Mullen is interested in this morning

With just one more day of trading in the first half of 2021 to go, global stocks are on track for their second-best performance since 1998. If the MSCI AC World Index’s gain of about 12% through June 29 holds, it would be beaten only by a 15% rise in 2019. The global stock benchmark closed at a record on June 28, and has risen almost 90% since its pandemic low in March 2020.

As we begin the second half, investor focus will soon switch to the upcoming earnings season. The second quarter could well mark peak earnings growth so comments on the outlook will be key for stock performance as will the impact of rising costs on margins. Outside of that, the same themes that dominated the first half will monopolize the second, and whether we get an equally strong next six months will likely depend on the path of other asset classes most notably bonds.

By: and

Source: Stock Markets Today: Delta Variant, Central Banks, Brexit Changes, OPEC+ – Bloomberg

.

Critics:

A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults. Financial crises directly result in a loss of paper wealth but do not necessarily result in significant changes in the real economy (e.g. the crisis resulting from the famous tulip mania bubble in the 17th century).

Many economists have offered theories about how financial crises develop and how they could be prevented. There is no consensus, however, and financial crises continue to occur from time to time. Negative GDP growth lasting two or more quarters is called a recession. An especially prolonged or severe recession may be called a depression, while a long period of slow but not necessarily negative growth is sometimes called economic stagnation.

Some economists argue that many recessions have been caused in large part by financial crises. One important example is the Great Depression, which was preceded in many countries by bank runs and stock market crashes. The subprime mortgage crisis and the bursting of other real estate bubbles around the world also led to recession in the U.S. and a number of other countries in late 2008 and 2009.

Some economists argue that financial crises are caused by recessions instead of the other way around, and that even where a financial crisis is the initial shock that sets off a recession, other factors may be more important in prolonging the recession. In particular, Milton Friedman and Anna Schwartz argued that the initial economic decline associated with the crash of 1929 and the bank panics of the 1930s would not have turned into a prolonged depression if it had not been reinforced by monetary policy mistakes on the part of the Federal Reserve,a position supported by Ben Bernanke.

See also

Specific:

 

 

Stocks, U.S. Futures Dip on Delta Strain Concerns: Markets Wrap

Asian stocks dipped Tuesday amid concerns a more infectious Covid-19 strain will derail an economic recovery. Treasuries and the dollar were steady after gains.

An MSCI index of Asia-Pacific shares was on track for its first decline in six days as countries in the region are struggling to contain the highly transmissible Delta variant of the virus. U.S. futures dipped after technology stocks led U.S. benchmarks to fresh records Monday. New limits on travel from Britain, which is seeing a spike in cases, dragged on cruise operators and airlines.

The Treasury yield curve flattened amid month-end index rebalancing and the break in auctions until July 12, reducing supply. Oil extended a decline with the market expecting OPEC+ producers to increase supply at an upcoming meeting. Bitcoin was steady around mid-$34,000.

Global stocks are poised to close out their fifth quarterly advance amid a worldwide vaccine rollout that powered an economic recovery and sparked concerns about increasing prices pressures and the withdrawal of stimulus measures. The recovery also drove the reflation trade as more economies reopened, though that is being hampered as some countries, especially in Asia, are falling behind in their vaccine strategies.

The U.S. is now the best place to be during the pandemic due to its fast and expansive vaccine rollout stemming what was once the world’s worst outbreak. Meanwhile, parts of the Asia-Pacific region that performed well in the ranking until now — like Singapore, Hong Kong and Australia — dropped as strict border curbs remain in place.

“The Delta variant has also emerged in our client conversations as a potential threat to reflation/inflation,” JPMorgan Chase & Co. strategists led by Marko Kolanovic said. “The economic consequences are likely to be limited given progress on vaccinations across developed market economies. It could, however, pose some risk of a delay in the recovery in countries where vaccination rates remain lower.”

Read: Asean Equities May Have Priced In Virus Setback: Taking Stock

For more market commentary, follow the MLIV blog.

Here are some events to watch in the markets this week:

  • OECD meets in Paris to finalize a proposal to overhaul global minimum corporate taxation Wednesday
  • China’s President Xi Jinping will deliver a speech as the nation marks the 100th anniversary of the founding of the Chinese Communist Party Thursday
  • OPEC+ ministerial meeting Thursday
  • ECB President Christine Lagarde speaks Friday
  • The U.S. jobs report is due Friday

These are some of the main moves in markets:

Stocks

  • S&P 500 futures dipped 0.1% as of 1:26 p.m. in Tokyo. The S&P 500 rose 0.2%
  • Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 1.3%
  • Topix index fell 1%
  • Australia’s S&P/ASX 200 Index dropped 0.4%
  • Kospi index lost 0.6%
  • Hang Seng Index retreated 0.8%
  • Shanghai Composite Index was down 1%
  • Euro Stoxx 50 futures were little changed

Currencies

  • The yen traded at 110.56 per dollar
  • The offshore yuan was at 6.4638 per dollar
  • The Bloomberg Dollar Spot Index edged up
  • The euro traded at $1.1913

Bonds

  • The yield on 10-year Treasuries held at 1.48%
  • Australia’s 10-year bond yield dropped five basis points to 1.53%

Commodities

  • West Texas Intermediate crude was at $72.56 a barrel, down 0.5%
  • Gold was at $1,774.24, down 0.2%

— With assistance by Rita Nazareth, Vildana Hajric, and Nancy Moran

By:

Source: Stock Market Today: Dow, S&P Live Updates for Jun. 29, 2021 – Bloomberg

.

Critics:

Beginning on 13 May 2019, the yield curve on U.S. Treasury securities inverted, and remained so until 11 October 2019, when it reverted to normal. Through 2019, while some economists (including Campbell Harvey and former New York Federal Reserve economist Arturo Estrella) argued that a recession in the following year was likely,other economists (including the managing director of Wells Fargo Securities Michael Schumacher and San Francisco Federal Reserve President Mary C. Daly) argued that inverted yield curves may no longer be a reliable recession predictor.

The yield curve on U.S. Treasuries would not invert again until 30 January 2020 when the World Health Organization declared the COVID-19 outbreak to be a Public Health Emergency of International Concern, four weeks after local health commission officials in Wuhan, China announced the first 27 COVID-19 cases as a viral pneumonia strain outbreak on 1 January.

The curve did not return to normal until 3 March when the Federal Open Market Committee (FOMC) lowered the federal funds rate target by 50 basis points. In noting decisions by the FOMC to cut the federal funds rate by 25 basis points three times between 31 July and 30 October 2019, on 25 February 2020, former U.S. Under Secretary of the Treasury for International Affairs Nathan Sheets suggested that the attention of the Federal Reserve to the inversion of the yield curve in the U.S. Treasuries market when setting monetary policy may be having the perverse effect of making inverted yield curves less predictive of recessions.

See also

 

Netflix And Boeing Among Today’s Trending Stocks

According to a report from the Washington Post dropped June 12, 1-year inflation is up 5%, while 2-year inflation sits around 5.6%. This has impacted everything from raw materials like lumber and glass to manufactured products. Used cars are up 29.7% in the last year, while gas has shot up over 56%, and washing machines and dryers sit up around 26.5%.

This comes as the global microchip shortage compounds retailers’ problems as they struggle to automate their supply chains. And while the economy (and the stock market) is certainly rebounding from covid-era recession pressures, consumers are stuck footing high-priced bills as both demand and the cost of materials continue to rise. Still, the Fed maintains that prices should stabilize soon – though “soon” may mean anywhere from 18-24 months, according to consulting firm Kearney.

Until then, investors will have to weigh their worries about inflation on the equities and bonds markets against the growing economy to decide which investments have potential – and which will see their returns gouged by rising prices across the board. To that end, we present you with Q.ai’s top trending picks heading into the new week.

Q.ai runs daily factor models to get the most up-to-date reading on stocks and ETFs. Our deep-learning algorithms use Artificial Intelligence (AI) technology to provide an in-depth, intelligence-based look at a company – so you don’t have to do the digging yourself.

Netflix, Inc (NFLX)

First up on our trending list is Netflix, Inc, which closed at $488.77 per share Friday. This represented an increase of 0.31% for the day, though it brought the streaming giant to down 9.6% for the year. The company has experienced continual losses for the past few weeks, with Friday ending below the 22-day price average of $494 and change. Currently, Netflix is trading at 47.1x forward earnings.

Netflix, Inc. trended in the latter half of last week as the company opened a new e-commerce site for branded merchandise. Currently, the store’s offerings are limited to a few popular Netflix tv shows, but the company hopes to increase its branded merchandise branded to shows such as Lupin, Yasuke, Stranger Things, and more in the coming months. With this latest move, the company hopes to expand its revenue channels and compete more directly with competitors such as Disney+.

In the last fiscal year, Netflix saw revenue growth of 5.6% to $25 billion compared to $15.8 billion three years ago. At the same time, operating income jumped 21.8% to $4.585 billion from $1.6 billion three years ago. And per-share earnings jumped almost 36% to $6.08 compared to $2.68 in the 36-month-ago period, while ROE rose to 29.6%.

Currently, Netflix is expected to see 12-month revenue around 3.33%. Our AI rates the streaming behemoth A in Growth, B in Quality Value and Low Volatility Momentum, and D in Technicals.

The Boeing Company (BA)

The Boeing Company closed down 0.43% Friday to $247.28, trending at 9.93 million trades on the day. Boeing has fallen somewhat from its 10-day price average of $250.67, though it’s up over the 22-day average of $240 and change. Currently, Boeing is up 15.5% YTD and is trading at 180.1x forward earnings.

The Boeing Company has trended frequently in recent weeks as the airplane manufacturer continues to take new orders for its jets, including the oft-beleaguered 737 MAX. United Airlines is reportedly in talks to buy “hundreds” of Boeing jets in the next few months, while Southwest Airlines is seeking up to 500 new aircraft as it expands its U.S. service. Alaskan Airlines, Dubai Aerospace Enterprise, and Ryanair have also placed orders for more Boeing jets heading into summer.

Over the last three fiscal years, Boeing’s revenue has plummeted from $101 billion to $58.2 billion, while operating income has been slashed from $11.8 billion to $8.66 billion. At the same time, per-share earnings have actually grown from $17.85 to $20.88.

Boeing is expected to see 12-month revenue growth around 7.5%. Our AI rates the airline manufacturer B in Technicals, C in Growth, and F in Low Volatility Momentum and Quality Value.

Nvidia Corporation (NVDA)

Nvidia Corporation jumped up 2.3% Friday to $713 per share, trending with 10.4 million trades on the books. Despite its sky-high stock price, Nividia has risen considerably from the 22-day price average of $631.79 – up 36.5% for the year. Currently, Nvidia is trading at 44.44x forward earnings.

Nvidia is trending this week thanks to surging GPU sales amidst the global chip shortage, as well as its planned 4-for-1 stock split at the end of June – but that’s not all. The company also announced Thursday that it also plans to buy DeepMap, an autonomous-vehicle mapping startup, for an as-yet undisclosed price. With this new acquisition, Nvidia will improve the mapping and localization functions of its software-defined self-driving operations system, NVIDIA DRIVE.

In the last fiscal year, Nvidia saw revenue growth of 15.5% to $16.7 billion compared to $11.7 billion three years ago. Operating income jumped 20.8% in the same period to $4.7 billion against $3.8 billion in the three-year ago period, and per-share earnings expanded 22.6% to $6.90. However, ROE was slashed from 49.3% to 29.8% in the same time frame.

Currently, Nvidia is expected to see 12-month revenue growth around 2%. Our AI rates Nvidia A in Growth, B in Low Volatility Momentum, C in Quality Value, and F in Technicals.

Nike, Inc (NKE)

Nike, Inc closed up 0.73% Friday to $131.94 per share, closing out the day at 5.4 million shares. The stock is down 6.7% YTD, though it’s still trading at 36.8x forward earnings.

Nike stock has slipped in recent weeks as the athleticwear retailer suffers supply chain challenges in North America. And despite recent revenue growth in its Asian markets, it also continues to deal with Chinese backlash to its March criticism of the Chinese government’s forced labor of persecuted Uyghurs.

In the last fiscal year, Nike saw revenue grow almost 3% to $37.4 billion, up 5.8% in the last three years from $36.4 billion. Operating income jumped 40.9% in the last year alone to $3.1 billion – though this is down from $4.45 billion three years ago. In the same periods, per-share earnings grew 33.7% and 82.8%, respectively, from $1.17 to $1.60. And return on equity nearly doubled from 17% to 30%.

Currently, Nike is expected to see 12-month revenue growth around 10.3%. Our AI rates Nike average across the board, with C’s in Technicals, Growth, Low Volatility Momentum, and Quality Value.

Mastercard, Inc (MA)

Mastercard, Inc ticked up 0.33% Friday to $365.50, trading at a volume of 2.7 million shares on the day. The stock is up marginally over the 22-day price average of $363.86 and 2.4% for the year. Currently, Mastercard is trading at 43.64x forward earnings.

Mastercard has faltered behind the S&P 500 index for much of the year – not to mention competitors like American Express. While there’s no one story to tie the credit card company’s relatively modest stock prices to, it may be due to a combination of investor uneasiness, already-high share prices, and increased digital payments. But with travel recently on the rise, it’s possible that Mastercard will be making a comeback.

In the last three fiscal years, Mastercard’s revenue has risen 3.3% to $15.3 billion compared to $14.95 billion. In the same period, operating income has fallen from $8.4 billion to $8.2 billion, whereas per-share earnings have grown from $5.60 to $6.37 for total growth of 16.4%. Return on equity slipped from 106% to 102.5% at the same time.

Currently, Mastercard’s forward 12-month revenue is expected to grow around 4.7%. Our deep-learning algorithms rate Mastercard, Inc. B in Low Volatility Momentum and Quality Value, C in Growth, and D in Technicals.

Q.ai, a Forbes Company, formerly known as Quantalytics and Quantamize, uses advanced forms of quantitative techniques and artificial intelligence to generate investment

Source: Netflix And Boeing Among Today’s Trending Stocks

.
Critics:
The S&P 500 stock market index, maintained by S&P Dow Jones Indices, comprises 505 common stocks issued by 500 large-cap companies and traded on American stock exchanges (including the 30 companies that compose the Dow Jones Industrial Average), and covers about 80 percent of the American equity market by capitalization.
The index is weighted by free-float market capitalization, so more valuable companies account for relatively more of the index. The index constituents and the constituent weights are updated regularly using rules published by S&P Dow Jones Indices. Although called the S&P 500, the index contains 505 stocks because it includes two share classes of stock from 5 of its component companies.

See also:

References:

Here’s Why Spiking Inflation And Labor Shortages Won’t Tank The Economic Recovery, According To Experts

New York City Reopens As Most Pandemic Restrictions Are Lifted

Spiking inflation, disappointing jobs gains and shortages of labor and commodities have investors wringing their hands over the state of the economy and the seemingly growing risk of overheating, but according to Moody’s chief economist, Mark Zandi, there’s no cause for alarm.

In a research note published Tuesday, Zandi emphasizes that all those factors are temporary.  “The recovery . . . may be uneven, given the considerable adjustments needed for the economy to fully reopen, but our outlook for a boom-like economy over the coming year has not changed materially,” he wrote.

The labor shortage and hiring difficulties will improve as students return to school and parents have more childcare options, he suggests, and he describes the evidence that federal supplemental $300 weekly unemployment benefits are keeping workers home as “thin.”

Zandi expects inflationary pressures to ease later this year once the economy returns to normal and businesses—especially those in the travel and leisure industry—get past the point where they are reversing their pandemic-era price cuts.

He suggested investor fears that stubborn inflation will force the Federal Reserve to hastily raise rates, thereby triggering a recession, are unlikely to materialize because of the significant slack still extant in the labor market.

Zandi also cites the ongoing semiconductor shortage as a major factor in the job losses and shortages in the auto manufacturing industry, but adds that he expects those pressures to abate by next year once surging demand and soaring prices for the chips prompt suppliers to boost production, thereby stabilizing the supply chain.

Crucial Quote

“Until the supply side of the economy wakes up and catches up with the fast-reviving demand side coming out of the pandemic, the economic statistics will undoubtedly hold more surprises—output and supply chains scrambled; labor, commodities and products in short supply; and price spikes,” Zandi wrote. “If history is a guide, when businesses can make a healthy profit, they will solve the problems,” he added. “Quickly.”

Key Background

Zandi isn’t the only expert looking beyond the risk factors to a robust recovery. Despite raising their expectations for one measure of inflation by more than a percentage point to a peak of 3.5% this year, analysts from investment giant Goldman Sachs believe the factors that caused them to hike the target for core CPI inflation—soaring used-car prices, production delays in the auto industry and changes in health insurance payouts—are temporary.

Not to mention, their impact isn’t as large across other measures of inflation that weigh prices differently. That sentiment is also beginning to make its way to Wall Street: “The inflation debate is not over, but the majority of Wall Street believes it will be transitory,” OANDA senior market analyst Edward Moya wrote in a Tuesday note.

Just as telling as the wage data, the share of working-age Americans who are in fact working has declined in recent decades. The country now has the equivalent of a large group of bakeries that are not making baguettes but would do so if it were more lucrative — a pool of would-be workers, sitting on the sidelines of the labor market.

Corporate profits, on the other hand, have been rising rapidly and now make up a larger share of G.D.P. than in previous decades. As a result, most companies can afford to respond to a growing economy by raising wages and continuing to make profits, albeit perhaps not the unusually generous profits they have been enjoying.

Chief Critic

But not everyone agrees. Larry Summers, an economist who served in the Clinton and Obama Administrations, wrote in a Monday op-ed in the Washington Post that while some of the recent inflation might normalize with time, “not everything we are seeing is likely to be temporary.”

Summers suggests that a handful of factors including demand that grows faster than supply, higher housing prices, inflation expectations and even higher minimum wages and more benefits for employees have the potential to push inflation even higher. Summer recommends that policymakers “explicitly [recognize] that overheating, and not excessive slack, is the predominant near-term risk for the economy.”

What We Don’t Know

When the Federal Reserve will move to tighten policy and raise interest rates. Atlanta Federal Reserve President Raphael Bostic told CNBC last week that given the 8 million jobs that have yet to be recovered, “I think we’ve got to have our policies in a very strongly accommodative situation or stance.” He added: “I don’t think we’re going to have answers on this until at least early fall, and it may take longer than that.”

One of the few ways to have a true labor shortage in a capitalist economy is for workers to be demanding wages so high that businesses cannot stay afloat while paying those wages. But there is a lot of evidence to suggest that the U.S. economy does not suffer from that problem.

If anything, wages today are historically low. They have been growing slowly for decades for every income group other than the affluent. As a share of gross domestic product, worker compensation is lower than at any point in the second half of the 20th century. Two main causes are corporate consolidation and shrinking labor unions, which together have given employers more workplace power and employees less of it.

I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.

Source: Here’s Why Spiking Inflation And Labor Shortages Won’t Tank The Economic Recovery, According To Experts

.

References

Nelson 1995, p. 158. This Marxist objection is what motivated Nelson’s essay, which claims that labour is not, in fact, a commodity.

%d bloggers like this: