Higher Gas Prices
We talk about consumer spending a lot and deservedly, since the consumer makes up over 68% of our economy and is a big driver of stock market growth and strength. A big concern we have right now is the price of gas, which shouldn’t be a secret if our viewers have filled up their tanks in recent weeks. As you can see in the chart shown in the video for this episode, the average price of a gallon of gas is $3.50 nationwide. This has doubled since the pandemic lows and at its highest level since September of 2014. It comes down to supply and demand. As you can see in the second chart show in the video, the OPEC producers have failed to add back supply as quickly as they agreed to. All the blue columns on the chart show months where production was below target. Most recently, in December, OPEC was pumping 800,000 barrels a day below their target. As we head into the spring and summer months where gas demand is higher due to increased travel, consumers will be pinched by stubbornly high gas prices. The bottom line is that gas prices will most likely remain elevated for the next few months which matters for the economy and for the markets and will be something we continue to follow closely.
Wages and Jobs
There’s money going out of your wallet but how much money is coming in? We received the jobs number on Friday and the whisper was that we may have a negative jobs number due to the omicron variant hitting the economy. However, the numbers were phenomenal with 467,000 jobs added in the month of January, beating expectations. In addition, we saw wages go up 0.7% month-over-month or almost 6% year-over-year. Those higher wages help absorb the cost increases. It doesn’t quite keep up with inflation but it’s good to see it moving in the same direction so maybe those increased gas prices aren’t as harmful if you have a job, and your job is paying you more. We’ve talked about month-to-month a lot and have been staying focused, but today we wanted to pull back and look at the long term. In a chart shown in the video for this episode from our research partners at Strategas, you can see that the jobs market is still roughly three million shy of where we were in February 2020. The bulk of those jobs, nearly 1.7 million, are in leisure and hospitality. This is something we’ve been talking about from an inflationary standpoint. We have mentioned before how we need to see people spending more on experiences and less on goods. In the chart you can see that transport has nearly half a million new jobs which is for transporting goods across this country. That’s not surprising, but we really need to see the spending on leisure and hospitality increase and we need to see other jobs come back. That should be disinflationary and should help ease that sting. We are also seeing wages in those areas much higher than where they were in 2020 so if we get back to full employment, where we were in January 2020, we’re going to be at a much higher total wage standpoint and really can be able to absorb some of these higher costs. This is something we are watching. We want to see more of where the jobs are, where they’re going, and maybe where we will hopefully see growth in the US economy.
The volatility that we have continued to discuss in January has bled over into February. Despite that volatility, the S&P 500 closed on Friday at a price of 4,500. That gives us a new resistance level of 4,540 and a new support level of 4,460. We also see a year-to-date moving day average on the S&P 500 sitting right at a price of 4,566. If we can get some resolution to some of the fundamental issues that we are experiencing, especially with the consumer getting out and spending money more, we might see some momentum in the market continue through the summer and hopefully through the end of the year.
Greg Powell, CIMA®
President and CEO
Email Greg Powell here
Bobby Norman, CFP®, AIF®, CEPA®
Email Bobby Norman here
Trey Booth, CFA®, AIF®
Chief Investment Officer
Email Trey Booth here
Adam Vansant, AIF®, BFA™
Email Adam Vansant here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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