As the summer draws towards fall, the ongoing pandemic, the dramatic weather events, and ongoing geopolitical drama are combining to set a rather grumpy backdrop. There’s a lot of good news too, though. Kids get to go to real in-person school this year, which I anticipate will have a positive effect on labor productivity, in addition to the obvious benefits for the children themselves of once again interacting directly with their peers.
We haven’t had all our statistical releases for August yet, but much noise was made about the “disappointing jobs report” for July as fewer jobs were being created than were expected, while meanwhile, the unemployment rate fell. The Job Openings and Labor Turnover Summary Report or “JOLTS” (terribly comforting acronym) announced a series high of 10.9 million unfilled jobs, with little change in turnover. It seems that jobs that were unsuited or unappealing to available workers in June did not magically become attractive or approachable as the summer wore on.
Snarky observations aside, ultimately, economics says wages will need to rise to draw more supply into the labor market. While rising wages spur concerns about inflation for some, I imagine this too will be “transitory,” to quote Fed Chairman Powell: more of a shift over a brief period than an acceleration of long-term trends.
Equities continued their impressive march upwards around the globe. Bonds fell slightly, as would be expected in a rising equity environment. The yield on a ten-year Treasury Note rose a wee bit, adding 0.08% or eight “basis points” as we like to say in the industry.
Basis points, each one one-hundredth of one percent, are a very useful term in finance. We throw it around to talk about bond yields, expense ratios, and investment performance. It also can make you look fancy in front of your mortgage broker if you want to give it a try. As in, “Jane is offering me 12 basis points better on this refi, can you match that?” Then they know they can’t mess with you. Maybe.
It’s all relative!
Since its pandemic low point on March 23, 2020, the S&P 500 is up 96.2% as of the end of last month. In “points,” the S&P 500 index bottomed at 2,237.40 and hit 4,522.68 on 8/31/21. The Dow Jones Industrial Average performed similarly over that period, gaining 84.4%. In nominal terms, though, the Dow bottomed at 18,591.93 last year and hit 35,360.73 at the end of August. For further comparison, the NASDAQ Composite index closed at 6,860.67 and 15,259.24 on these two dates respectively. This works out to 121.8%. (Its heavier technology exposure explains the differing returns in the period.) A “point” on each index means something quite different, depending on how and when the index was built.
So when I hear “The Dow was up 100 points today,” on the news, I get annoyed. Even a super math geek like me has to think through the numbers in my head to remember if that is a lot or a little. If both the Dow and the S&P 500 were up 100 points in a day, they have actually fared rather differently. Stating the closing number helps somewhat, but busy people do not necessarily feel like doing mental math to understand what they’re hearing. Percentages help. Eventually, I’ll get around to complaining to my favorite news sources…
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