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6 charts from the past week that tell an interesting story in markets and investing…
1) The Delta Effect
The Delta variant continues to spread rapidly throughout the US, with hospitalizations rising to their highest levels since early February.
This is leading to a pullback in consumer activity, with notable declines in visits to Gyms, Grocery Stores, Restaurants, and Retailers.
2) Crude Pullback
It has also lead to a sharp pullback in Crude Oil, which hit its lowest level since May this week, down 20% from its high in July.
In turn, Energy stocks ($XLE ETF) are also down 20% from their recent highs, closing below their 200-day moving average for the first time since last November.
The concern: rising fears of Delta will lead to decreased travel and in turn lower demand for Oil.
3) Free Money Fading
The free money effect (stimulus payments) is starting to fade a bit with US Retail Sales now down 3% from their April high.
4) Semiconductor Shortage
The global semiconductor shortage is worsening, with rising covid-19 numbers in Asia leading to more supply chain disruptions.
The impact on auto manufactures is huge, as today’s cars use chips to help control everything from engines and transmissions to brakes and air bags.
As a result, Ford’s inventories have been steadily declining, and the company is actually shifting to an online ordering model that would make this a more permanent feature going forward. While consumers would have to wait longer to take delivery of their vehicle, this would help Ford and its dealers cut inventory costs and potentially increase profitability.
After a sharp advance early in the year, auto stocks are pulling back from their highs, with investors expecting lower sales to persist until the chip shortage is alleviated.
5) The Freedom Premium
Chinese internet companies ($KWEB ETF) hit another new low this week and are now down over 57% from their high in February.
Over the last 10 years, Chinese equities ($FXI ETF) have averaged a return of 1.4% per year versus 9% per year for Taiwan and 14.7% for the US. Investors are increasingly placing a premium on freedom.
6) Amazon.DepartmentStore?
Since Amazon ($AMZN) went public in 1997, its sales have increased at an astounding rate of 45% per year (from $56 million to $443 billion).
In doing so, Amazon has completely transformed retail (it is now the largest seller of clothing in the US), put countless brick-and-mortar stores out of business, and taken market share from those that remain.
Their latest plan to continue world domination: open large retail locations similar to department stores.
And that’s all for this week. Thanks for reading.
Have a great Sunday and week ahead.
-Charlie
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