Private Client Group

May 2nd, 2022

Commodity Prices Still Rising, Durable Goods Demand Strong, Wage-Price Spiral

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In today’s Steady Investor, we dive into key factors that we believe are currently impacting the market and what could be next for the markets, such as:

Commodity Prices Probably Haven’t Peaked – The list of surging prices in the commodity markets is long. Increases in oil and natural gas prices over the last two years have been the steepest on record since the 1970s. A jump in prices for wheat and cooking oil – both of which are significantly produced in Russia and Ukraine – has been the biggest in over a decade. Corn and soybean prices are approaching record highs, and fertilizer prices have spiked. The World Bank anticipates that a broad swath of commodity prices will remain elevated for the balance of 2022 if not longer, as the war will ultimately reshuffle how commodities are produced, shipped, and traded. Energy prices appear likely to continue on a similar path, according to the World Bank, with expectations of a 50.5% year-over-year price increase. Food prices could jump 22.9% in 2022, which would follow a 31% increase last year. All of these pressures in the commodity markets could put pressure on global consumers, particularly those in the developing world. Here in the U.S., inflationary pressures are being felt at the pump and in the grocery store, but incomes are also rising and the jobs market is one of the strongest in history. The impact of inflationary forces on total spending may not be as pronounced as many anticipate.1

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Should You Time the Market?
 
There is one big problem with market timing — study after study shows that the average investor is a poor market timer. In many cases, investors will invest heavily when the market is doing well or abandon their long-term financial strategy when volatility sets in.

Instead of falling into the trap of trying to buy “at just the right time,” get our free guide, “How Market Timing Can Affect Your Retirement Plan2.” This guide seeks to explain these behavioral traps and offers potential solutions.

If you have $500,000 or more to invest and want to learn how you may be able to avoid these mistakes today, click on the link below to get your free copy.


Download Zacks Guide, “How Market Timing Can Affect Your Retirement Plan2

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U.S. Durable Goods’ Orders Continue to See Strong Demand – In a sign that the U.S. consumer is not yet fully fazed by rising prices, demand for long-last goods and appliances – known as durable goods – has gone up in five of the last six months. New orders for durable goods went up by 0.8% in March, to a seasonally adjusted $275 billion. Consumers continued to show strong demand for cars, computers, and an array of other electronics and appliances meant to last at least three years. In a similar realm, new orders for nondefense capital goods – which tends to be a good indicator for the level of business investment in the economy – also jumped by 1% (month-over-month) to $80.8 billion in March. Taken together, the combined demand has driven higher manufacturing activity, which represents a smaller share of total U.S. economic activity than the services sector, but points to growth.3

Switching Jobs Could Mean Higher Pay, Which Could Also Mean Higher Inflation – The dynamics in the U.S. labor market today currently favor workers – job shortages are reported virtually everywhere, and workers have been quitting jobs and switching jobs at a stout pace. The reason is often to receive higher pay. A new survey conducted by jobs website ZipRecruiter found that 64% of job-switchers report raking in higher pay at their new job. Among these workers, some 50% of them reported a wage increase of over 10%. Job-switchers appear to have an advantage over those who are staying on the same job – according to the Federal Reserve Bank of Atlanta, annual wage growth for a typical worker reached 6% in March, which is nearly double the 3.7% rate in February 2020, before the pandemic. For job-switchers, however, annual wage growth is higher, at 7.1% according to the Atlanta Fed. Wage growth is good for the labor market, but over time could have inflationary implications. Companies trying to stay competitive in the labor market may need to continue raising wages, which could mean raising prices in an effort to compensate for rising costs. As this cycle repeats itself, it is known as a wage-price spiral, which the Federal Reserve cannot necessarily control with higher interest rates.4

In today’s market, how are you protecting your investments and potentially saving for retirement? It can be easy to get swept into the negative headlines that saturate the news. When emotions are running high, many investors fall into the trap of trying to buy “at just the right time,” or selling stocks in the midst of a crisis out of fear. Both of these impulses are likely to lead to more failures than successes over time. Instead, we recommend focusing on the long-term view and sticking to your course.
 
But before making any big decisions, check out our guide, “How Market Timing Can Affect Your Retirement Plan.”5 This guide seeks to explain emotional and behavioral traps that investors can fall prey to and offers potential solutions to common mistakes that many self-managed investors make.
 
If you have $500,000 or more to invest and want to learn how you may be able to avoid these mistakes today, get your free copy by clicking on the link below:

Disclosure

1 Wall Street Journal. April 27, 2022. https://www.wsj.com/articles/new-age-of-scarce-supply-risks-inflationary-headwinds-challenging-central-banks-11651060801?st=4w7k3oyupnnoh4u&reflink=desktopwebshare_permalink

2 ZIM may amend or rescind the “How Market Timing Can Affect Your Retirement Plan” guide for any reason and at ZIM’s discretion.

3 Wall Street Journal. April 26, 2022. https://www.wsj.com/articles/march-orders-for-long-lasting-goods-rose-on-auto-computer-demand-11650977663?mod=djemRTE_h

4 Wall Street Journal. April 24, 2022. https://www.wsj.com/articles/workers-are-changing-jobs-raking-in-big-raisesand-keeping-inflation-high-11650792602?mod=djemRTE_h

5 ZIM may amend or rescind the “How Market Timing Can Affect Your Retirement Plan” guide for any reason and at ZIM’s discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
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