Retail Hiring, Tech-Sector Firing, and the Outlook for Gold

Much of the weakness since early last year has been in global manufacturing, which may also be bottoming. President Donald Trump’s trade wars have been blamed for the global factory recession. [We] suspect that there may also be a more structural problem: The global economy is stuffed with too much stuff. Both young adults and seniors are becoming minimalists, so they’re buying less stuff (like autos), leaving too much manufacturing capacity relative to the slowing demand.
–Ed Yardeni

Holiday-Season Hiring

Economic Update
by Regions Financial
Dec. 6: In any given year, one wild card in the November employment data is holiday- season hiring in retail trade and in warehousing and delivery services. Given the ongoing shifts in consumer-spending patterns, it is no surprise that holiday-season hiring in retail has diminished in recent years, while hiring in warehousing and delivery services has grown stronger. This year saw not seasonally adjusted payrolls in retail trade increase by 466,400 jobs, compared with 494,800 jobs last November. At the same time, hiring in warehousing and delivery (courier) services rose by 132,900 jobs (not seasonally adjusted) this November, compared with a gain of 115,500 jobs last November. To be sure, holiday-related hiring begins in October and runs through early December, so it is the period as a whole that matters, but the shift in hiring patterns will continue to mimic the shift in consumer-spending patterns.
–Richard F. Moody

Win-Win for Gold

Economic Update
by Regions Financial
Dec. 6: Gold is now in a position to benefit from increasing worries over the U.S. credit market and economic outlook. Concerns over a potentially weaker dollar will also benefit gold’s intermediate-term (three to six month) trend. Gold’s fear factor and currency component thus present a “win-win” situation for the yellow metal in the coming months. While an immediate-term buy signal hasn’t yet been confirmed, investors are still justified in maintaining longer-term holdings of the metal.
–Clif Droke

Tech Sector Job Cuts

Global Market Commentary
by Maria Fiorini Ramirez
Dec. 5: November [job] cuts were led by the technology sector, which announced 7,292 cuts last month. So far this year, technology companies have announced plans to cut 63,447 jobs from their payrolls, the third highest total for any industry through November. The technology sector’s total is 380% higher than the 13,222 cuts announced in this industry in the same period last year.

The tech sector is undergoing major changes due to an evolving landscape. New technologies are changing the way people work and often make workplaces more efficient. In addition to potential staffing changes, there may be differences within the leadership and board ranks regarding exactly which path a company will take. In fact, we have tracked the highest number of CEO changes in the tech sector on record this year.

Indeed, 181 chief executives have left their posts in the technology sector through October this year, the latest month for which we have data. That is 46% higher than the 124 tech CEOs who left their posts through October 2018, and 19.1% higher than the 152 tech CEOs who left their posts during the whole of 2018.
–Joshua Shapiro

Market Pause

Phases & Cycles
by Phases & Cycles
Dec. 3: The
S&P 500
index spent the past few weeks consolidating its position above previous resistance levels. Other major market indexes have also achieved new all-time highs. These developments reaffirm the longer-term bullish position of the New York market. But the S&P 500 [was] stretched in the short term and in need of a pause. We continue to expect a small 2.5% to 4.5% pullback, which should happen in December.
–David Tippin, Ron Meisels

Elizabeth Warren Selloff?

U.S. Economics
by Bernstein
Dec. 2: The presidential election has barely begun and has already produced one piece of conventional wisdom—that Elizabeth Warren would crush the equity market. Prominent investors have gone on record with predictions of a “Warren drawdown” as soon as February, yet such predictions were also made in the last election, only to see the opposite result. So we wonder: What can be said about the nexus of presidential elections and the equity market, and how high is the bar for politics to dominate markets?

We find the idea that a presidential election—even a controversial one—could dominate the equity market throughout 2020 difficult to buy into. Empirically, there is a powerful pattern of markets ignoring presidential contests for most of the year, then [catching] up in the last six weeks or so before the election. This pattern, which also held in 2016, speaks against equity-market pricing of Warren’s political fortunes for much of 2020—irrespective of the consequences of her policy agenda.
–Philipp Carlsson-Szlezak, Paul Swartz

Small-Caps Revival

Avalon’s Weekly Market Guide
by Avalon Advisors
Dec. 2: While U.S. small-cap stocks (
Russell 2000
) have underperformed large-caps (S&P 500) by almost five percentage points year to date, small-caps have outperformed by almost one percentage point since the end of the third quarter. There is significant evidence that the outperformance in small stocks could continue. Valuations are attractive and currently stand at over two standard deviations cheaper relative to the S&P 500. Since valuation is a poor timing tool, it is worth noting that the Russell 2000 hit its first 52-week high in more than a year last week. According to Strategas Research Partners, the Russell 2000 was higher in the following 12 months in 10 out of 11 similar instances since 1982, with an average gain of 15.2%. Small-caps should also benefit if investors continue to exhibit a growing risk appetite with biotech, its second-largest sector at 8.3%. The largest sector, diversified banks, at 9.9%, should benefit from improved economic growth and a steeper yield curve.
–Bill Stone

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