The letter K with line graph lines over top

Weekly Market Comment October 9 2020

When stimulus talks were tweeted to end, Federal Reserve Chairman Jerome Powell reminded investors the economy has “a long way to go”, and requires continued economic support. The stock market continued to power higher this week in response.

Rather than a “V” or a “U” shaped recovery, many have described this as a “K” shaped one.  The bottom leg of the “K” includes hospitality, entertainment, and tourism, while the upper leg includes online services and big-box discount retailers. If you’re like us, this will have been the longest stretch of not going to the movies since being allowed to venture out of our childhood house without parental supervision!

We continue to see the market’s optimism for medical breakthroughs, despite Covid’s presence generally rising of late. This fall and winter are going to be especially challenging as many people are suffering some level of quarantine and social distancing burn-out. The colder season’s lower humidity and temperatures (sending more of us indoors) won’t help.

Smells like Teen Spirit

recent survey asked American teenagers how they spent their money. While not as powerful a consuming block as Millennials (who last year overtook Baby Boomers in terms of population), teenagers are the up-and-coming spendthrift 20-somethings. And what they like is something investors should pay attention to.

The top “global lifestyle” brand is Nike, finishing #1 for 10 years in a row and continues to increase its market share for this category. As for the top shopping website, it’s no surprise that Amazon blows away the competition. The websites SHEIN (what’s that??) and Nike placed a distant second and third with about 5% a piece.

Cell phones? You guessed it: Apple. By a country mile, as 86% of teens prefer iPhone over other smartphones. And that figure is up 300 basis points from a year ago. That number is going to rise, too, as 89% said their next phone will be an iPhone. Coupled with their new 5G offering to be announced on Tuesday, Apple should continue to dominate. In fact, the Apple Watch tied as the most popular watch to have. What’s it tied with? Why, Rolex! Something those teens are going to have to stay in school and work hard if they want to own one!

Other top brands in the survey include Starbucks, Netflix, Google (their YouTube being almost as popular as Netflix), as well as video game makers Activision Blizzard (Call of Duty). Teens are spending more on gaming (10% of total wallet share) than ever before. Global pandemics mean more gaming time, as well as more online shopping, streaming, and cell phone usage.

Which reminds us of a Netflix documentary we think every gadgets user should see. It’s called “Social Dilemma”, gadget/screen/internet/social media addiction is real and works in a similar physiological way that drug addiction. As always, awareness is half the battle to overcoming addiction and the social ills addiction promotes. Among teens? Suicide, not getting outdoors as much, and superficial socialization growing out more real and meaningful social connections.


Noteworthy links:

 

Musings Beyond The Markets

The concept of politicians vote-buying involves them spending copious amounts of money the government doesn’t have to endear themselves with voters.

It’s usually something one party’s supporters sees only in the other party.

The NDP announced a campaign promise of giving $1,000 via direct deposit to families whose household income is below $125,000, and gradually smaller amounts to those earning up to $175,000. For single people, they propose $500 cash payment to anyone earning under $62,000 (smaller payments for those earning above that, up to $87,000). Other gifts include free public transit for kids 12 or younger, a rent freeze through next year, and other assort manna from heaven.

Is this an example of vote buying?  “We want British Columbians to know that we’re not just throwing money to try and buy votes,” Prime Minister Horgan insisted seriously.

Others have suggested otherwise.  

 

Word of the Week

spendthrift (n.) – a person who spends money in an extravagant, irresponsible way. “It is better to lose health like a spendthrift than to waste it like a miser.” Robert Louis Stevenson