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7 charts from the past week that tell an interesting story in markets and investing…
1) The Jobs Comeback Continues
22.4 million jobs were lost in March and April of 2020 during the nationwide covid shutdowns. Since then, 18.4 million jobs have been added back, including 210,000 in November. That still leaves 4 million to get back to pre-covid levels, but this has already been the greatest jobs comeback in history.
The US Unemployment Rate continues to move down at a rapid pace, hitting 4.2% in November. This is its lowest level since the start of the pandemic and well below the historical average since 1948 (5.8%).
Take a close look at the Fed Funds Rate and Inflation Rates in the past when the Unemployment Rate was at 4.2%, as it is today.
The outlier is not hard to find (see also: 0% rates make 0 sense)…
2) Goodbye Transitory
The housing boom continues with US home prices hitting another record high, up over 19% in the last year.
Here’s the breakdown within the 20-city Case-Shiller Index…
Rents in the US are also on the rise, up over 18% year-to-date, the largest increase we’ve ever seen.
Fed chair Powell seems to be finally recognizing the ridiculousness of the word “transitory” in describing the highest inflation rates we’ve seen in 30 years, saying “it’s probably a good time to retire that word.”
He also suggested that the Fed could speed up the tapering of asset purchases “perhaps a few months sooner” than anticipated.
3) Last Memes Standing
Nearly every parabolic meme stock advance in the last year has completely reversed course, with the notable exception of the King and Queen of memes: GameStop and AMC.
While they’ve certainly held up better than their peers, they have not been immune to recent weakness in speculative issues, with both stocks now down over 60% from their year-to-date highs. And for the first time since the meme stock mania began in January, both are trading below their 200-day moving averages.
4) Twitter Troubles
Twitter announced a new CEO this week but that did not seem to help its stock which continued to fall (now -49% from its high in February). Incredibly, it’s trading back below the first day close from its IPO 8 years ago.
5) Crude Oil Correction
Crude Oil is in the midst of a 27% correction from its October high, which is the largest we’ve seen this year. The year-over-year increases in commodity prices are finally starting to abate.
6) DiDi Delisting
Shares of Didi ($DIDI), the Chinese version of Uber, fell further this week after announcing plans to delist from the NYSE and move its listing to Hong Kong. Its market cap has fallen $50 billion from its peak in early July.
Shares of other Chinese tech companies fell in sympathy, with the China Internet ETF ($KWEB) now down over 61% from its high in February. This is its largest drawdown to date (inception of ETF: July 2013).
7) Bitcoin Blues
Bitcoin has fallen 39% from its November high, its 3rd correction of more than 30% this year. Here’s a look at major corrections in Bitcoin since 2010…
Market history doesn’t repeat itself but it often rhymes. Bitcoin suffered a large correction (ultimately -84%) after the euphoria surrounding the start of futures trading in Dec 2017 and is correcting today (-39%) after the euphoria surrounding the first Bitcoin ETF.
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And that’s it for this week. Thanks for reading.
Have a great Sunday and week ahead!
-Charlie
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