Several members of our team recently visited different parts of the US but came back with the same observations. “We’re Hiring” and “Help Wanted” signs were literally everywhere and much more prominent than previous years to the same locales. Restaurants, big box retailers and manufacturers alike had signs, banners and radio and TV commercials looking for employees. I was talking with a gentleman from Ohio who told me he and his coworkers are being asked to work triple shifts at the steel company that employs them because they can’t find skilled workers. Food prices are higher although the price of gasoline was extremely low. In our view, the anecdotal evidence indicates that perhaps the Fed is behind the curve with respect to raising rates. Today’s blowout jobs numbers in the US is further evidence that the Fed may need to act sooner rather than later despite moves by the Bank of England to stem post Brexit disruptions.
Our anecdotal evidence seems to be supported by the US equity markets which continue to drift upwards with little fanfare, if any. Post Brexit anxiety has been replaced with US election anxiety I suppose. One of the lingering stories of the 2008 recession has been the poor/diminished labour participation rate in the US. Now it seems that many displaced workers are being enticed back into the labour force in increasing numbers.
Our take is that the US economy could easily accommodate a rate increase at the next FOMC meeting. This would be good news for banks, insurance companies, financials and pension funds that could use the relief of higher rates. Export driven US companies may suffer if higher US rates lead to a higher USD (which is a likely scenario). However, the recent cut in rates and further easing by the Bank of England may hamper the Fed’s efforts to lift rates.
Closer to home we are obviously very tied to what happens south of the Border. Low rates continue to push property prices through the stratosphere and large dislocations are beginning to appear hear as well. As we head in the third quarter we remain optimistic yet cautiously vigilant for any changes in economic headwinds. We continue to see value in specific sectors that are able to grow sales, earnings and dividend payouts.
We hope you are enjoying your summer sun. Please give us a call if there is anything we can help with.
The Mountford Group