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Financial Markets Continue Climb
Bears keep looking for signs the stock market will make a significant correction. They sight job vacancies, inflation, stimulus programs, and supply chain snarls. However, the stock market has moved steadily upward, reaching new highs along the way.
Can all the Chicken Littles be wrong? Let’s take a look at what is moving the markets.
Labor Market Improving
The U. S. Department of Labor last week reported a dip in unemployment of 268,000. That was the seventh straight decline.
In addition, continuing claims for unemployment insurance dropped to 2.08 million. That is the lowest since March 2020, when COVID started impacting the job market.
Retail Surge
Major retailers surpassed earnings expectations in the third quarter and are continuing to prosper in the fourth.
Sales jumped 16.3 percent year-over-year in October. Notably, that was the third straight monthly gain. In addition, that is 21.4 percent higher than pre-pandemic spending.
Stores such as Macy’s, Kohl’s, Walmart, and more all beat expectations.
“It’s more important to look at what consumers do than what they say,” Gus Faucher, chief economist at PNC Financial, told Reuters. “They are concerned about higher inflation, but they are still in good shape and are continuing to spend.”
Economic Recovery
According to the Bureau Of Economic Analysis, the U.S. economy has recovered this year at the fastest rate on record – 33.8 percent. That is an eye-popping figure.
Going forward, most economists see growth settling at about five percent for the fourth quarter. After that, the consensus is that growth will level off next year and settle into a more moderate rate.
Can Markets Continue Climb
Analysts are divided about the future of stock prices. Some see the market as overvalued. Others say the good times will continue to roll as long as central banks stay out of the way.
“What we have been seeing is over 60 days of record highs in 2021,” Kathleen Brooks, founder of Minerva Analysis, told Capital.com..”So not an uncommon feature but of course all things must come down.
“We have loose monetary policy at present but unless central banks slam on the brakes we won’t see a massive pullback in stocks. In the spring that’s when we may see some weakness, momentum – the way that it is we will see some pullback.”
Profit From Infrastructure and Build Back Better
A massive wave of government spending is about to hit the U. S. economy, with Congress considering more legislation that would almost double that amount. All that cash opens the door for investment opportunities.
President Joe Biden’s $1.2 trillion infrastructure plan was signed into law earlier this month. In addition, his $2.2 trillion Build Back Better plan passed the United States House of Representatives last week. It will be taken up in the Senate after it reconvenes Monday.
What Is in the Infrastructure Law
Measures in the Infrastructure Investment and Jobs Act include:
- $110 billion for roads and bridges
- $39 billion for modernizing public transit
- $66 billion for Amtrak/rail
- $65 billion for power grid upgrades
- $65 billion for broadband expansion and improvement
- $55 billion for clean drinking water
- $71 billion for climate resilience and environmental remediation
- $25 billion for airport repairs
- $11 billion for transportation safety
- $7.5 billion for EV charging stations
- $7.5 billion for school buses
“This Bipartisan Infrastructure Deal will rebuild America’s roads, bridges and rails,” according to a White House statement, “expand access to clean drinking water, ensure every American has access to high-speed internet, tackle the climate crisis, advance environmental justice, and invest in communities that have too often been left behind.“
Popular Even With Opponents
The new law is so popular even legislators who voted against it tried to take credit for its success.
House member Gary Palmer (R-AL) said passage of the law would provide funds for 56 miles of highway in Birmingham that was one of his “top priorities”.
The only problem was that Palmer voted against the bill. As a result, he was skewered by commentators and comedians alike.
Build Back Better Legislation
The Senate is expected to alter parts of the Build Back Better plan that passed the House. If that happens, the measure will return to the House for another vote.
As a result, the particulars of the measure could change. Consequently, money allocated for the bill could also change. For instance, the original measure called for an expenditure of $3.5 trillion but whittled down to $2.2 trillion.
Generally, Build Back Better would expand health care, mend the nation’s social safety net, and fight climate change.
Where To Put Your Money
Many investments will benefit from the infrastructure law and Build Back Better. However, since details of Build Back Better could change, we will focus on investments in infrastructure.
Some funds poised to profit from the Infrastructure Investment and Jobs Act include:
iShares U. S. Infrastructure ETF (IFRA) has drawn interest. It seeks to invest in companies involved in domestic infrastructure. Those companies include utilities, railroads, materials producers, and construction firms.
Global X U. S. Infrastructure Development ETF (PAVE) is focused on the U. S. market. In addition, it is the largest infrastructure ETF. Its holdings center on companies that are involved in construction, raw materials, and industrial transportation.
FlexShares Stoxx Global Broad Infrastructure Index Fund (NFRA) invests in emerging markets and U. S. infrastructure. Significant portions of those investments are in communications. As a result, it could profit mainly from the expansion of broadband.
Diving Into the Metaverse
Time Magazine is diving into the metaverse in a big way. In addition, it is funding its new enterprises with Ether digital tokens.
The 98-year-old publication has partnered with Galaxy Digital, a 15-year-old cryptocurrency investment company, to initiate two new metaverse offerings.
Metaverse Newsletter
Time launched a newsletter entitled Into The Metaverse last week. Staff writer Andrew Chow produces the piece.
“The newsletter will explore the ways our physical and digital selves are becoming increasingly blurred,” Time announced, “highlight communities that are rapidly emerging in new digital settings, and talk to leaders at the forefront of the business, innovation, and culture taking place within the metaverse.”
In addition, it will publish a Time 100 Companies list of the top metaverse related businesses.
Investment Push
The metaverse is an immersive virtual world. It has become a subject of increased interest among a variety of businesses. Facebook even changed its name to Meta Platforms.
Investment bank Morgan Stanley sees a variety of investment opportunities in the metaverse.
“Virtual Reality (VR) and Augmented Reality (AR) technology will likely benefit from acceleration in investment in the years ahead, in our view,” stated a recent Morgan Stanley report. “Importantly, VR/AR technology has already been improving, and this could drive more blending of digital and physical worlds.
Large technology companies are investing more and more money in the metaverse, notes Morgan.
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