Persistent Employment Concerns, the Path Ahead After a Bear Market, and Fears for the Novice Investor

Employment remains a persistent problem in the U.S., forming a—to bring back a 2020 buzzword—checkmark recovery as continuing unemployment claims remain stubbornly elevated. As 21 states move to end pandemic-era boosts to unemployment assistance, could the labor shortage begin to ease and activity reignite in bottlenecked industries? Meanwhile, are investors, and their $1.3 trillion of annualized equity inflows so far this year, prepared for a potential uptick in volatility as we move further out from the 2020 bear market? The S&P 500® Index is already experiencing one of its longest stretches without a 5% pullback in a decade, after all… And as cryptos fall under pressure amid increased regulation in China and #buythedip trends on Twitter, the 1000% spike in reported losses to crypto scams over the last year has us concerned. Do novice investors and the reddit crowd know what they’re getting into?

1. Despite a roaring economy, there are still sectors that have a long way to go to full recovery. U.S. employment is only back to the trough of the Great Recession:

Source: Blackrock, from 5/19/21

2. Despite massive job openings and an acute lower-end labor shortage, continuing unemployment claims remain stubbornly high. If the government paid you more not to work, would you go back to work?

Source: Wall Street Journal, from 5/18/21

3. The massive increases in building costs plus supply bottlenecks and labor shortages have put many new housing projects on hold:

Source: Axios, from 5/19/21

4. It seems everyone is “all in” on equities. Who will be the next buyer?

Source: BofA Global Investment Strategy, from 5/19/21

5. With history as our guide, this year may have some volatility. Note the larger increases hare followed by the larger corrections:

Source: Truist Advisory Services, Bloomberg, from 5/18/21

6…And we are overdue for a correction as we haven’t seen even a 5% pullback in the S&P 500 since last fall:

Source: Truist Advisory Services, from 5/18/21

7. Another “OK Boomer” reflection on crypto: NO protection or FDIC type insurance:

Source: Axios Visuals, from 5/18/21

8. More than half of the U.S. Treasury bond issuance is being purchased by the Fed. What happens when the Fed tapers/ends QE?

Source: The Daily Shot, from 5/18/21

9…Not to mention almost $2 trillion in mortgage-backed bonds…

Source: Bloomberg, from 5/18/21

10. Double/triple bottom? Which way will the USD break?

Source: Bloomberg, from 5/19/21

11. Japan appears to be getting control over their 4th wave of Covid, great news for Olympic athletes. Their GDP, however, did not respond well:

Source: The Daily Shot, from 5/18/21