Kingsview CIO Scott Martin discusses the gap between wage growth and inflation growth, plus the price of inflation at the grocery store.
Program: Fox Business Tonight
Station: Fox Business News
BRIAN BRENBERG: Well, let’s bring back Scott Martin Scott, I know you’re not buying cheaper cuts of meat, but we’re getting to the point where all these price hikes have to start really cutting into the health of the economy in terms of growth. Scott, we’ve seen a lot of spending. The economy has sort of held its own through all this. But at what point in next year the consumer has run out of steam? And businesses are stuck now with people not buying things because prices have gone up so much?
SCOTT MARTIN: Yeah, there’s a tipping point soon, and you can see that in some of the wage growth numbers vis a vis the inflation numbers. Brian, whether you look at CPI or the deflator within GDP because you start to see the gap widen between the wage growth and the inflation growth. Now you mentioned on what I’m spending my money on my man. Here’s the thing you talk about growth. The fact that all this stuff costs more is actually helping or alleviating the growth that I would usually be having in my waistline right now because I’m spending the same amount of money at the grocery store, but not eating as much. So it’s actually maybe doing some of us a favor. When we did it, we never dieted over the holidays. Now you’re kind of doing it by default.
BRENBERG: Well, apparently you can’t get into gyms anymore in places like New York unless you’ve got your vax card and all this stuff. So I guess the solution is paying more for your food. You won’t eat as much and maybe you are looking thin and good, my friend Scott. It’s always good to see you. Always good to get your perspective on the economy and all sorts of things. Thanks for showing up today.
MARTIN: See you!
Kingsview SVP Paul Nolte discusses how the DOW is up and how the Federal Reserve just announced they will be buying less bonds and trimming their balance sheet to address higher than expected inflation reports.
December 6, 2021
“Well, here’s another nice mess you’ve gotten (us) into.” In describing the current economic conditions, Fed Chair Powell admitted what everyone has known for some time, inflation is not transitory and may require a bit more aggressive Fed policy. From a quicker tapering of the bond purchases to maybe raising rates quicker in 2022, the markets are reacting negatively to the thought that the very easy monetary policy that has been in place for the past 20+ months is coming to an end. The employment report on Friday was the exclamation point on the strong economic data. While the total number of “jobs created” came in at half of what was expected, the employment rate dropped to the lowest levels since the start of the pandemic. Wage growth remains well above 5% annually. The coming week we’ll get a read on consumer prices as well as how many folks are quitting jobs. With the money that has been pushed out by the government over the past two years, many, especially older workers, have decided to leave the workforce entirely. It is a Covid effect on the job market that is likely to have an impact for many years to come.
The change in tone from Chair Powell coincides with the economic data coming in “hotter” than expected and a huge boost to GDP estimates. Based upon the Atlanta GDP model, estimates are for over 8% economic growth in the fourth quarter. Much of the supply chain problems can be attributed not to the lack of workers (yes that is part of the issue) but the huge jump in demand for goods. Looking at retail sales, historic growth has generally moved between 3-7% growth vs. year ago levels. Even coming out the recession in ’08, retail sales briefly touched 10% annual growth. Today that growth has been over 10% nearly the entire year with the most recent reading at almost 15%. With demand so far above historic trends, even accounting for the economic shutdown of a year ago, it is little wonder that prices are rising. This will be the Fed’s biggest challenge over the coming year or two; how to cool the economy without pushing it into another recession.
The number of stocks making new yearly lows has expanded to a level last seen during the depths of last March’s decline. Volume has increased with the market decline. On the NYSE, three consecutive days of declining volume exceeding advancing volume by at least three times has usually marked at least a short-term bottom in prices as investors bail on the market. Some of the measures of momentum and selling pressure are at levels usually seen around market bounces as well. So, just maybe the Santa rally is still in place. Worries about the Covid variant is also having some impact on stocks as investors fear reinstatement of some forms of economic restrictions. Hopefully lessons have been learned over the past year as we deal with the residual impacts from the virus and shutdowns.
The bond market is signaling a slowing of economic activity in 2022. Whether that is driven by the Fed or just the ending of various government support programs, the market move is unmistakable. So too is the change in difference between junk yields and government bonds. The change in the bond market is worth watching over the coming weeks to confirm the signal and by extension, a deeper reaction from the stock market.
The recent decline in stocks has impacted the growth part of the market more than value. Having been the darlings since last March’s bottom, growth stocks have been all the rage. The valuation differences between growth and value in the largest stocks hasn’t been seen since the late ‘90s. During the years following the market top in 2000, value, small and international stocks all did well in both absolute terms as well as relative to the broad market averages. Whether the coming years will be a 20+ year reprise of the tech wreck we’ll only see in a few years. But investors should do well to focus on the neglected parts of the market that still have solid fundamentals and underappreciated growth prospects.
The harsh decline in growth stocks over the past few weeks that has bled into the broader market may be setting up for the highly anticipated Santa Claus rally. If coal gets delivered, 2022 could be a tough year.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.
Kingsview CIO Scott Martin discusses wage inflation, the choices companies are facing, and the push toward green energy.
Program: Fox Business Tonight
Station: Fox Business News
BRIAN BRENBERG: Inflation burning a hole in Americans wallets, more companies raising prices on consumers. You know, stuff like burritos, washing machines, chips, soda pop, all increasing in cost here now. Scott Martin of Kingsview Wealth Management, a big soda pop drinker, he’s also a Fox Business contributor. Scott, great to see you, my friend. Look, I want to go to this data. This has been the story all along. We’ve heard, Hey, don’t worry. The labor shortages aren’t going to get passed on to consumers. Don’t worry, the supply chain problem is not going to get passed on to consumers. Scott consumers are getting nailed.
SCOTT MARTIN: Yes, and don’t worry, the government knows best. They know what to give the American people so that they go back to work eventually, which they’re not doing, and I think that’s one of the big issues, Brian, is that a lot of the folks that are going back to work, God bless them, are requiring more pay because the government subsidize them so well over the course of them not being employed. That is one thing that’s showing up big. I think that’s one of the risks here is looking at the wage inflation numbers that we’re starting to see now that the job market is starting to at least act more normally so that companies have one or two choices, either they pay their workers more and have less profit or in the case of workers that come in and earn more wage, they have to raise prices. And so the effect is going to be a little bit detrimental to the economy, especially as we come out of this.
BRENBERG: Yeah, you get that spiraling effect. Look, I got a bigger paycheck. That’s great. I go to the store. I used to spend seventy dollars a week on grocery now. Now I’m spending one hundred and twenty dollars. I’m sitting there last night talking to my wife over dinner, and she’s explaining to me how this meal costs like 30 percent more than it did six months ago. Scott, the average family’s paying one hundred and seventy five dollars more a month in prices. Because of this, this economy cannot thrive on that kind of inflation.
MARTIN: I agree, and I can’t thrive either, because I can’t even get my wife to have dinner with me, so so kudos to you on that, let alone how much it cost no matter the cost. The funny thing to Brian is we’re seeing this inflation kind of pervasive in every area. I mean, you look at food prices, you look at cost of transport things, you look at gasoline, all these things that are out there now that are really a shock to this system. And what’s funny to me, though, the reason it feels so bad is because we did have it pretty darn good for the last eight years or even the last 10 coming out of the financial crisis. I mean, we’re in basically a deflation or lets say and non-inflationary environment. So when prices do start to go up as they are now because of the wages, because of the fact that we have a scarcity of materials, it feels a little bit worse than maybe it normally would have.
BRENBERG: We had we had basically no inflation, we had wages going up. We had abundant jobs. That was good. But Scott, take this all the way back. This is really, to me, a story of oil and energy. Dagen made the point earlier day one. Keystone Pipeline You look at every issue affecting the economy. You can trace it back to what’s happening with energy.
MARTIN: You sure can, and you can trace it back to government policy on green energy and the fact that, you know, AOC and the crew all the way up to Biden have totally made this huge push towards green energy, which is very expensive and not part of our complete fabric. So you’re talking about the reliance on less fossil fuels and now this push towards green energy, which frankly, is just costing the country too much. And you’re right, it’s spreading across everywhere, except my friend is, you know, very well and Kirk Cousins passing stats. I mean, we want real inflation. Let’s get his numbers up.
BRENBERG: Only place I want to see inflation right now is the point that the Vikings put on the board and they cannot get it done. But Scott, look, this is we talk about the debt ceiling. You talk about spending, Scott, you talk about inflation. We have got the wrong prescription. The Vikings got the wrong prescription for what’s going on. We’ve got the wrong prescription for this economy. You always have the right prescription. Scott Martin, thank you for being with
MARTIN: The Doctors in here, buddy.
Kingsview CIO Scott Martin discusses food inflation, employment and whether the job market may be normalizing.
Program: Your World with Cavuto
Station: Fox Business News
NEIL CAVUTO: Forget about not even born, I mean, you don’t he doesn’t even remember a bear market, that’s next guy. Scott Martin Fox Business Contributor But again, an uncanny read of these markets for a young whippersnapper, Scott. You know, they’re mentioning the inflation word again and they’re saying, you know, be prepared for it sticking around a while. Are you in that camp?
SCOTT MARTIN: In parts of that camp, Neil, I think the gasoline concerns are definitely there and going to stay there, the food and some of the materials, I’m not so sure now. It’s funny the things that Lydia was talking about, Neil. It’s kind of things that we should probably be eating less of anyway. So maybe the inflation is doing a favor for us. I mean, personal story. I may or may not have brought some Golden Oreos with me to the studio today. You never know. The point is, you go to the store now, man used to be able to buy those Golden Oreos in the pack, and they had about sixty in them, for about you know, five bucks or something. Now you’re down to about 40 for a higher price. We probably don’t need to be eating 60 of those things anyway in a setting. So for my sake, some of the food inflation might actually maybe force us to make some healthier choices. Oh my gosh.
CAVUTO: Well, I don’t don’t go nuts here, but I don’t relate to this because, you know, I haven’t noticed the same run-up in prices in arugula, but you could be right. Yeah. But you know, I’m wondering because when inflation takes hold, it has a devil of the time sort of easing back. And we saw that from the 70s experience. Not that I think that that is necessarily the case now. But what do you look for that would at least get you thinking maybe this is more of a problem than I thought?
MARTIN: I think the secret Neil lies in the job market. I think it basically pans itself out in wage inflation because our good buddy, Milton Friedman, who yes, I’ve read about didn’t actually get a chance to meet him, which was the old talk of saying, you know, inflation is basically a monetary phenomenon. It’s too much money chasing too few of goods. We definitely have to feel good. I mean that that’s evident everywhere around the country today. But the wage thing that too much money chasing those goods may or may not be really the case here. So I think until that pans out to where we have both sides of those things fighting it out, I think that’s why I still think Jay Powell has it right. I think a lot of this stuff is transitory. It’s probably lasting a little bit longer than a lot of folks predicted. But we’re going to start to see we’ve got a jobs number tomorrow. I’m going to start to see those wage numbers, I believe calmed down as the job market maybe normalizes here.
CAVUTO: All right. We’ll see what happens. Scott Martin, great catching up with you and great relying on the expertise these last few years here, even though you weren’t alive when we started. But it’s good. Good that you’re alive right now.
Kingsview CIO Scott Martin discusses the variance in data points – job numbers, consumer confidence, PMI, and inflation.
Program: Mornings with Maria
Station: Fox Business News
Time: 6:00 AM
DAGEN MCDOWELL: Time for the word on Wall Street. Top investors watching your money. Joining me now, Kingsview Wealth Management Chief Investment Officer, Fox News contributor Scott Martin, UBS Financial Services Private Wealth Advisor Alli McCartney, and Strategic Wealth Partners president and CEO Marc Tepper. Good to see all of you this morning. Scott, let me kick it off with you. We’re standing by for a weekly jobless claims out at eight thirty a.m. Eastern Time. Investors, of course, also waiting on the August jobs report due out tomorrow. The expectation there, seven hundred fifty thousand jobs added to the economy. The unemployment rate ticking down to five point two percent. Scott, what are you watching for?
SCOTT MARTIN: It all sounds awesome, doesn’t it? And I think these days is as untapped. That’s Mark Tepper. If you’re playing at home, if talked about all morning. There’s a lot of variance in these data points now. It’s just not the jobs numbers. It’s consumer confidence numbers. It’s PMI. It’s even inflation. My goodness. So the reality is this, Deighan, I think the market is ready for, say, a stinker to use a technical term here in the job market, because it’s not all bad news, boys and girls, because what that means is that kids, I think we go back to Mark annd I’s, say high school football days when we were stud’s, I think. Right, Mark, this is the lead block that the Fed needs going forward to keep that stimulus train going. If we start getting stinky again, to use that word, jobs numbers here, that allows the Fed to keep the spigot going as far as liquidity to the markets.
MCDOWELL: When you’re talking about the Fed, Scott, before we move on, in terms of the political pressure on Jay Powell, I just wonder and Tep can get in on this later as well. I just wonder, though, that won’t the spigot stay wide open because maybe Jay Powell wants to get another, you know, another term. Just real quick on that.
MARTIN: Yeah, another handful of years. Yeah, totally. And I think that’s the interesting thing is maybe Jay Powell is actually hoping for some disappointing economic numbers so he can justify the liquidy. But let’s face it, I mean, either maybe maybe they’re into the taper as soon as they think or maybe they don’t do the interest rate hikes as soon as they think. What are the other is not going to happen. So as far as the job numbers are concerned, I think the Fed has been right down the middle of the fairway. Another sports analogy. Yes, it’s early with respect to how they’re treating these markets and giving the markets what they need and what they expect. And that’s why we’re at or near all time highs in the S&P Nasci.
MCDOWELL: Yeah, I dare you to work in a cricket analogy. And next time you come on, Ali, I want to move on to you here. Let’s talk about consumer confidence. August, consumer confidence falling to its lowest level since February. And at the same time, we have companies like Costco announcing it’s going to reinstate purchasing limits on select items because people, again, are stockpiling goods as Covid cases. Serj, put this in perspective from a market or investor standpoint.
ALLI MCCARTNEY: Yeah. There’ll be no sports analogies here, I promise I couldn’t if I tried. Maybe lacrosse. I don’t know how that works. So, look, let’s go back to last March when the recovery in the market at least was was really heightened. And we said bull market participants said this is not going to be a straight line recovery. And the truth is that between now and then and very recently, it has been largely both in terms of earnings market numbers and economic information, pretty much a straight line recovery. And now we sit at this inflection point where a lot of the things that we were concerned about that were those downside risks have surfaced. We have a variant that is taxing hospitals and concerning both consumers and producers. Yet again, we have severe weather. We have back to school and we are past peak earnings. And so I think what a lot of the numbers that we’ve been seeing, both the ADP numbers we got yesterday, which were, you know, have 60 percent of what we were hoping for in terms of additional payrolls. I think the jobs number that we get tomorrow will reflect this as well. And consumer confidence, which we did get yesterday, which is the lowest number we’ve seen since February, which think about it, that was like the ramp up of both confidence in the vaccination program. So we’re now sitting at this low where consumers aren’t having checks deposited into their accounts where everybody was, at least where I am in New
York, the thought was everybody would be going back to New York in July and August in September. A lot of that has now been pushed forward as a result of the Delta variant into January. So we have sort of gone like this, and now we’re going to be here for a bit. And I think once we see the Delta variant, once we have a sense of how, quote unquote temporary or transient inflation is, once we have infrastructure kicking off and some more clarity in Washington, I think you will see another leg up
MCDOWELL: your dogs behind you, Ali, and we just love it.
MCCARTNEY: He hears you talking about dogs and there is nothing I can do.
MCDOWELL: It’s been a morning for everybody here in the Northeast. So we love seeing our fluffy little ones. Mark, we briefly mentioned the Fed before. Progressive lawmakers are calling on President Biden to replace Fed Chair Jay Powell, who has been campaigning for reappointment. Meantime, in a new Wall Street Journal op ed, Judy Shelton calls on Congress to rein in the Federal Reserve, calling its power unchecked. Your thoughts on the future of the Fed? And my issue is progressives putting pressure on Jay Powell to be more tough, particularly on financial regulations, banking regulation. I just think that it adds a real uncertainty, not maybe about the role of the Fed that investors might be underestimating.
MARK TEPPER: Yes, absolutely. So, look, I think the path of least resistance is to reappoint Jay Powell, like my man, ScotI Market said he’s been right down the middle of the fairway. I think he’s done a pretty good job. I disagree with his comments about inflation being transitory. I think it’s going to be a little longer lasting than that. But that’s a different story. When you look at Jay Powell, he’s got public support from senators on both sides of the aisle, even Janet Yellen, who supports his reappointment. And when you when you try to figure out what the market impact is going to be here, I think here’s what investors need to know. If Powell isn’t reappointed, the Fed’s going to become even more dovish. So that should continue to prop up stock prices. And right now, it’s essentially a two person race between Powell and Brainard. And dig into your point. Brainard is a left leaning enough that she could potentially transform the Fed’s mandate. Right now, it’s all about full employment and price stability. She could align the Fed more with Biden’s priorities on financial regulation and, of course, racial equality. Climate change. Right. But at the end of the day, here’s what I think happens. I think Powell gets reappointed. I think Brainard gets elevated to vice chair so that there’s some extra influence there. And I think you’ll end up getting more regulation in the financial system, probably a bit bearish for financials and crypto. But I think more of the same for everyone else.
MCDOWELL: Thank you so much, Mark. You sit right there, Scott Martin and Alli Macartney, thank you so much for being with us this morning. And hold that dog close, Ali. Much more ahead
MARTIN: Tell him about the Chewy earnings.
MCDOWELL: Yeah, exactly. Much more ahead this morning.