How Stock Bubbles Die
The mega trends in the next decade are increased wages for workers and declines in corporate profit margins. The political tailwinds are in place. There is high income inequality; the large cap companies are earning extremely high profit margins. Politicians have these large cap firms squarely in their crosshairs. One proposal that supports this point is the global minimum tax.
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Aligned with this trend is universal basic income which might be experimented with beyond the recent COVID-19 stimulus checks. We also could see an increase in union membership. Amazon employees have been attempting to unionize, but Amazon has thwarted some of these efforts. As you can see from the chart below, there has been a minor uptick in unionization in the past few quarters. This follows a very long period of declines since the 1970s.
Wall Street Is Headed Through The Roof
UPFINA
As we mentioned in a previous post, it seems the Fed needs to keep buying TIPS to keep the nominal rate from spiking. We aren’t talking about hyper inflation or rates as high as they were from the 1970s to the 1980s. However, a 4% 10 year yield would probably have a destabilizing effect on markets. That’s just a hypothetical number. We don’t know the exact rate the 10 year yield will become a problem. The Fed doesn’t want to find out when it will be an issue.
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Most Disconnected Market Ever
This is one of the most disconnected stock markets in history. The lesson we have learned in the past 10 years is if stocks are up and the economy looks weak, trust stocks. That might not be bad advice this time because the economy is set to receive another stimulus, interest rates are at zero, and the vaccines are being distributed. There have now been 6.25 million vaccine doses given out in America and 17.5 million worldwide.
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The state with the highest percentage of citizens vaccinated is West Virginia at 4.13%. Unfortunately, the COVID-19 data still looks bad and there will be a new record total of deaths for a month in January. The 7 day average of people in the hospital is at a record high of 128,349. The 7 day average of deaths is 2,758 which is also record high. The data has normalized after the holiday.