Past performance is no guarantee of future results. Trend signals are proprietary research of Fortunatus Investments, LLC, a Registered Investment Advisor with the Securities and Exchange Commission (SEC). Reference to registration does not imply any particular level of qualification or skill. Prior to June 2014, Fortunatus Investments was a wholly owned subsidiary of Executive Wealth Management, LLC and they continue to share common ownership and control. Data source for returns is FactSet Research Systems Inc. This chart is not intended to provide investment advice and should not be considered as a recommendation. One cannot invest directly in an index. Executive Wealth Management does not guarantee the accuracy of this data.
Quote of the Week
|And just as the grave will swallow Jackson’s fame, time will erode the Estate’s income. It resurrected and then sold what became its most valuable asset to Sony before trial. The value of what it has left, no matter how well managed, will now dwindle as Jackson’s copyrights expire and his image and likeness shuffle first into irrelevance and then into the public domain.|
An unusually morbid musing from Tax Court Judge Mark V. Holmes in his 271-page opinion released last week on the years long tax dispute between the Internal Revenue Service and Michael Jackson’s estate. Basically, Judge Holmes believed that the IRS had overvalued the deceased pop star’s assets because it didn’t account for the fact that fame is fleeting.
What are we to make of a big miss in Nonfarm Payrolls on Friday? It may be less than we think. First, in the chart below of seasonally adjusted (SA) data from the U.S. Bureau of Labor Statistics (BLS), we get the sense that the “consensus” estimate was just pure extrapolation from the previous three readings:
This miss versus the consensus was the big headline, and the market rallied on that news. Why would it do that? You could say that there has been a bit of speculation fever our there in high growth names. In the short run, those names have been helped along by a very accommodating (low) short term interest rate as well as by all of the programs that the Federal Reserve has undertaken over the last 14 months. The market has begun to price in rate hikes in 2022 and we have heard from some Fed Governors hint that they would like to begin tapering the bond buying programs and see some rate hikes in the future. With a less than favorable jobs report the thought is that the those Fed Governors will not be able to withdraw the central bank stimulus, thereby keeping easy money flowing to the highest growth names. It can be perplexing when bad news makes the markets go up.
We suspect that this jobs report was not as bad as it looked from the 20,000 foot level. The market sector with the largest employment gain for April was Leisure & Hospitality, and those gains accelerated above the March gains. Those companies are attempting to hire in front of what is expected to be a very busy summer recreational season. In addition, it is encouraging to see that the average wage rose in April by 0.7%. We remember back to the dark days of April 2020 when we saw a 4%+ wage growth due to the anomaly of lower wage employees losing their jobs while higher wage earners maintained their employment thereby producing a distorted wage gain (see the chart directly below). That was somewhat rectified in the following months with some rehiring of lower wage employees. This time around the largest job winners are the lowest paid and we are still seeing some good wage growth.
So was there a supply shortage that caused the less than favorable employment increase in April or was it a lack of demand for employees? According to the National Federation of Independent Business (NFIB) in their April jobs report, “44% of all small business owners report having job openings they could not fill, 22 points higher than the 48-year historical average.” This means that there is demand for employees. Looking at the chart below, we can see that job openings are almost back to all-time highs as of February 2021.
None of these things are bad, and we expect to see employment pick up again in the course of the next year. It does take time to work the slack out of the system. It took roughly 6 years to regain all of the employment lost after the Global Financial Crisis of 2008, so we are still moving in the right direction.
On Monday, May 3rd, the Fortunatus Opportunity models underwent their monthly relative strength rotations. The Global and the U.S. Growth models both reduced their exposure to small-cap stocks. In order to fill the vacancies, the Global model added a new real estate fund and the U.S. Growth model added a fund focused on companies in the financial sector.
There were no other trades in the Fortunatus models during the week ending on May 8th, 2021. The major equity market sectors remain in a long-term favorable trend, and the Fortunatus Asset Allocation models are near their maximum allowable equity exposure with domestic stocks favored over international shares.
On a Lighter Note
Despite early progress in the field of people-plant communication made by Bill and Ben the Flower Pot Men in 1950s England, most of us have been deaf to the persistent jibber-jabber of our greenery. Well, not anymore. Earlier this year, engineers at MIT announced that they had enabled spinach plants to send emails by means of underground sensors. The researchers hoped that this would alert them to early contamination of the soil.
Although the data is promising, some skeptics are dubious of the responses received from the studied spinach crop and are convinced that there must have been plants in the audience. However, if we assume that the email records are authentic, what did they talk about? Well, there was a lot of gossip about how bad the new curls looked on the leaves of the kale plants next door. There were also several complaints that writing and responding to emails was distracting the spinach from its real work of photosynthesis. Finally, there were several warnings sent out by the old-timers, those with weathered stems and wilted leaves, to the new spinach sprouts about their plant’s most ancient enemy. The destroyer of worlds and bringer of death who, though dormant for many years, may yet rise up once again if some new Hollywood director is looking for old content to bring back to the big screen. The one whose name was once only whispered in the wind: Popeye.
The most tech-savvy generation of spinach plants.
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Returns are calculated as indicated below with reinvested dividends not considered except for the Barclays U.S. Aggregate Bond Index. Data source for returns is FactSet Research Systems Inc. The London Gold PM Fix Price is used to calculate returns for gold.
1 Week = closing price on April 30, 2021 to closing price on May 7, 2021
1 Month = closing price on April 7, 2021 to closing price on May 7, 2021
3 Month = closing price on February 5, 2021 to closing price on May 7, 2021
YTD = closing price on December 31, 2020 to closing price on May 7, 2021
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