Monday Memo: October 25, 2021

What a week!

Last week was a great week for the US Stock Market.

As you can see from the chart above, US Equities closed at all time highs. This is due to about 25% of the companies in the S&P 500 have reported their 3rd quarter earnings. Almost all of them have met or exceed the estimates (which was a pretty low bar).

The biggest threat(s) to continuing this rally are two fold.

1) Inflation - Have you filled your gas tank lately? Gone grocery shopping?

Items are costing a lot more than they did a year ago. And the government (ie “The Fed”) is turning a blind eye towards inflation. They claim that the inflation is “transitory” and will soon go away as it was caused by “re-starting” the economy.

I’m calling BS!

The inflation (IMHO) is due to the trillions of dollars that has been printed and injected into our economy. We have not been “shut down” for a long time and there was never a “re-start”.

However, there is a lot of money chasing the same amount (or fewer goods) which has driven the prices of nearly everything up.

And this has lead to the second problem . . .

2) Supply Chain Issues / staffing problems - Ships are literally out to sea as they cannot be unloaded on the docks. If they could be unloaded in a timely fashion, there is a shortage of truck drivers (which causes companies to pay more to hire drivers, which causes higher prices - see #1 above).

Yesterday I wanted a peanut butter sundae from a local ice cream shop (I know, it’s not on my diet. But I had a craving). I drove to the location because that had a drive through as I did not want to be social.

It’s website said it was open until 10pm. As I pulled up at 8:08pm, it was closed. Lights off, doors locked. Closed!

So, I decided I would have to settle for a McFlurry (Oreo) at the 24 hour McD’s. Not my best choice, as I like to support small businesses.

As I pulled up, the Golden Arches were not lit, the drive through had cones blocking it and the lights were off. No more 24 hour drive thru.

Why?

Staffing issues. The same staffing issues that caused the supply chain issues are affecting every corner of the economy.

Want more/better staff?

Pay more. See above. It’s a vicious cycle.

How long will it last?

It will last until the number circled above goes above 70. That is when the Relative Strength Indicator (RSI) shows an “overbought” market. Will that be this week? Next week?

No one knows.

But I don’t predict the selloff will last too long as there should be more money being injected into the economy soon.

Stay tuned and stay confident my friends!

-Kevin T Clark

CEO & Co-Founder of Plan Confidence Corp