The Beat Goes On

U.S. Stocks closed ‘mixed’ on Friday, as investors shifted into the safety of the dollar and government bonds, this after fresh Covid-19 restrictions in Europe, hindering the Global Economy recovery. The broad U.S. eked out a gain this past week, propelled by strong retail earnings and more ‘out-performance’ by the Big Guys. Inflation looms, but has shown little sign of hurting results so far, and investors keep reaping their rewards. Despite inflation, earnings are ‘calm’ for stocks. “Today we are seeing a very typical end-of-week sell off as traders decide it’s not worth the risk to await more potential demand-side bearish news,” research company Rystad Energy said. The yield on the benchmark 10-year Treasury note dropped to 1.535% Friday from 1.586% Thursday. Bond prices rise when yields decline. One of the few assets that hasn’t performed well lately is oil, which fell 5.8% on the week and 10% from its late-October highs. Supply is coming back as some U.S. producers ‘ramp up, and demand is slackening because of a spike in Covid cases in Europe. Brent crude, the Global oil benchmark, declined 2.9% to $78.89, its fourth consecutive weekly decline. This coming week, investors will be watching to see if President Biden nominates a new Federal Reserve chair or sticks with the current one, Jerome Powell, often quoted by this writer. For the week the S&P 500 slipped 0.1%, or 6.58 points, to 4697.96- after closing at a record high Thursday. The Dow Jones Industrial Average declined 0.7%, or 268.97 points, to 35601.98, its second consecutive weekly fall. The tech-heavy Nasdaq Composite climbed 0.4%, or 63.73 points to finish the week at 16057.44, its 46th record this year, thanks to its loaded array of winners.

Retail Revival…..America’s stores are enjoying an unexpected revival, over the past year. Many struggling retailers have ‘clawed’ their way back, and have harnessed ‘macroeconomic’ changes ‘ushered-in’ by the pandemic to propel themselves into the marketplace again. Brands that mixed bricks and mortar operations with digital strategies are seeing sales soar and their stock prices rise, lifted by consumers ‘chomping-at-bit to spend their pandemic savings. Now with the holiday season upon us, these ‘new’ retailers are poised to reap the year’s biggest numbers. “The consumer wants to shop when and where they want to,” said B. Riley, analyst Susan Anderson. As retailers forge ahead, doomsayers might have to hold off on heralding a retail apocalypse. For now, the sentiment is clear: “Consumers are rediscovering the joys of bricks and mortar shopping. The Mall has become ‘cool’ again,” writes Sabrina Escobar Miranda and Logan Moore.

As major countries move toward reaching a goal of zero carbon emissions and a bigger shift toward cleaner-energy alternatives, demand for metals such as lithium, cobalt, copper, and nickel is expected to soar. These metals used in cleaner-energy have now become known as “green” metals. Copper is used extensively across wind, solar, hydro, nuclear, and geothermal energy, and …electric-vehicle and battery technologies. Lithium prices have already more than doubled this year. The October reading for the lithium price index is up a whopping 225% year to date, according to data from Benchmark Mineral Intelligence. The recently passed infrastructure bill includes $7.5 billion to build out the U.S.’s network of electric vehicle chargers, which is expected to help speed up the adoption of EV’s. The “trend of increasing EV penetration is key for (lithium) demand going forward,” says Cameron Perks, senior analyst at Benchmark Mineral Intelligence. At the same time, there is “little chance of a balanced supply market” in the next few years, he says. The total share of mineral demand from the energy sector would rise significantly over the next two decades to over 40% for copper and rare-earth elements, 60% to 70% for nickel and cobalt, and almost 90% for lithium, according to the International Energy Agency. Lithium supply has been “severely underinvested in the past few years, while demand is expected to grow ‘exponentially’ throughout the decade as several countries set ambitious targets for EV sales,” says Scott Yarham, associate regional pricing director for metals in Europe, the Middle East, and Africa, or EMES, at S&P Global Platts. Lithium demand was at about 300,000 metric tons last year and is expected to reach one million metric tons in 2025 and two million metric tons in 2030, according to S&P Global Platts.


Dan Fuss, vice chairman Loomis Sayles, on fears that investors are taking on too much risk, Barron’s “It scares me when I see what we’ve given up in natural prudence and caution.”

Bill and Cole Smead, Co-managers, Smead Value, Discussing investment decisions, Barron’s “Companies need to meet an economic need, have a distinct competitive advantage and track record of profitability, generate free cash, and trade at a significant discount to their intrinsic value.” Adding, “the health of a company’s balance sheet, its history of shareholder-friendly decisions, and strong insider ownership,” the father-son team reiterated.

Veronica Clark, Citi economist, Barron’s “Since retail sales are reported in nominal terms, meaning the data aren’t inflation-adjusted, it is worth considering the corresponding increase in the consumer price index. That’s a back-of-the-envelope way to inflation-adjust the sales figure,” says Ms. Clark. “Applying the CPI roughly suggests that higher prices represented about half of the October increase in sales, with actual sales volume representing the balance.” She adds, “I wouldn’t look at it and say, ‘All our concerns are gone,’ ” notes Ms. Clark. “Part of it is that prices are pulling forward holiday shopping,” she adds.

Christopher Brown, Co-portfolio manager of the total return bond strategy at T.Rowe Price Group, Inc. WSJ “I suspect Covid has sort of faded into the background. I think we’re going to have wobbies like this, (the past week). Is it ever going to go away? Probably not.”