Zacks Investment Management

In today’s Steady Investor, we dive into current news and key indicators in the market that we believe investors should consider such as:

• Cargo ships running behind schedule
• Inflation’s impact on the Fed’s actions
• Retraining the modern economy

Cargo Ships Keep Running Behind Schedule – Have you tried to purchase something recently, only to find that it was “out of stock” and/or that the delivery date was far into the future? You’re not alone. Supply chain issues have hindered the smoothness of the global economic recovery so far this year. One link in the supply chain contributing to these disruptions: cargo ships. In ‘normal’ years, cargo ships arrived on time in ports about 70% of the time. In March of 2021, that number plummeted to 40%. Delays around the world are being driven by a corporate rush to restock items, driving demand through the roof and creating logistical issues. Cargo vessel capacity is being pushed to its limit, and there is currently a shortage of sea containers available to move goods around the world. As a result, freight rates are rising, which is pressuring margins at corporations. What’s more, inflation is also building elsewhere in the production process, with rising prices across raw materials and key components like lumber and semiconductors. The labor market is also struggling to keep up, which opens the wider debate of whether these inflationary pressures are transitory or could become a long-term issue.¹

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How Much Inflation Will Cause the Fed to Act? Equity markets were rattled a bit on Wednesday, following the release of minutes from the Fed meeting in late April. Markets have displayed this pattern in the past – looking for any sign that the Fed is even willing to tighten monetary policy as a signal to de-risk. Some of the statements from the Fed minutes were mixed. Officials made it clear that the U.S. economy remains far from the Committee’s goals, though they also conceded that the risks to the outlook “were no longer as elevated as previous months.” Most of the Fed’s language seemed to indicate that inflation was being watched but that the risk was balanced and the inflation outlook was transitory. Even still, some market watchers saw signs that ‘tapering’ (a form of tightening) would be a topic in upcoming meetings, as the Fed starts to make plans for reducing their massive bond-buying program. Taper talk tends to instigate volatility in the equity markets, but recent history also shows it can be short-lived.³

Retraining in the Modern Economy – There have been many stories recently about imbalances in the labor market, with many small businesses desperate to hire workers they cannot find. One economic solution to the problem: raise wages. But another angle some retailers are embracing is retraining existing staff for new jobs, instead of hiring new personnel. The pandemic changed the nature of many retail and hospitality businesses, from how consumers make purchases to how goods are ultimately delivered. Technology is usually involved. That means many of the jobs that existed just two years ago look different today and require a different set of skills. That’s where retraining comes in. As an example, Levi’s has enrolled a small set of employees in “machine learning boot camp,” which teaches employees coding and statistical analysis, even to those with no previous background in the field.⁴

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