Weekly Newsletter - Week of 5.16.2021
"Houston, we have a Problem"
Inflation continues to lead to a seesaw of emotions in the stock market. With consumer sentiment declining (down to 82 from 88), prices rising (3x more expensive to produce lumber than this time last year), and a shortage of workers (many employers can’t even get people to come in for interviews), we’ve seen growing signs of inflation everywhere. In fact, in a study conducted by Factset, the term “inflation” was cited by 175 different S&P 500 companies during Q1 earnings call. This is the highest overall number since early 2010. On the employer front, we’ve seen places like McDonalds, Chipotle, and Walmart all push for increases in pay and incentives for workers.
Unfortunately, the shortage extends deeper than just labor and lumber. As an example, this week we learned about the chlorine shortage which is potentially causing issues to a pool season that hasn’t even started yet. Let's also not forget about the chip shortage, which might be the most impactful supply chain issue to date.
Retail Earnings Ahead
Looking to the week ahead, we'll be eyeing signs for a reversal. In the retail space, many of the top companies are set to reporting earnings. We’ll hear from Wal-Mart, Home Depot, Target, Lowe’s, TJX and Kohl’s, just to name a few. Just last week, we saw April retail sales fall 0.3 percent from March 2021. Although this doesn’t seem significant, it was below consensus numbers due to the hope that the multiple rounds of stimulus would boost sales. Stay tuned for these calls and expect retail to be a major focus in the coming week.
Crypto.. Dare I Say.. Bubble
Elon Musk continues to make headlines after stunning investors by announcing that Bitcoin may no longer be used as a form of payment for purchasing Tesla vehicles. This flew in direct contrast to his recent remarks, made just a few weeks ago in March. His announcement comes after a period of consolidation in Bitcoin's price during the month of April (while many of its cryptocurrency peers continue to set new highs). Musk’s comments have fueled growing concerns over the economic impact of mining Bitcoin. Musk recently stated, “We are concerned about the rapidly increasing use of fossil fuels needed for Bitcoin mining. Cryptocurrency has a promising future, but this concept cannot come at the great cost of the environment.”
Doge Enthusiasm Continues
In an unexpected announcement, we learned Dogecoin will be added to the Coinbase exchange. Coinbase is the largest cryptocurrency exchange and this move should only stoke Doge's enthusiasm. While no date for the listing was cited, this addition should take place within the next 6-8 weeks. Dogecoin is up 35% for the week.