Market Update 9.7.21
What's going on in the economy?
Yoooo,
It’s been a while since I wrote my first article back in December 2020 titled “2021 Market Outlook”, so this article is to cover what has transpired over the 8 months of the year so far.
Individual stocks have been very volatile this year but the overall market is up about 22% (S&P 500). Interest rates are still very low and no serious plan of increasing in the near future according to Jerome Powell and the Federal Reserve. That can always change based on economic conditions such as inflation. I personally think interest rates will begin to rise. With all the money printing that occurred in 2020 and early 2021 inflation seems unavoidable. You literally see it in the price of everything around you. As the Federal Reserve realizes this I think the only choice will be to slowly raise rates. Currently, we are in the phase where liquidity is finally starting to decrease. Unemployment benefits have just ended. Within the next few months, depending on your state, eviction moratoriums will be ending as well. This is subject to change as the dates have already been pushed back a few times. As liquidity dries up, this is a time I would prefer to have some cash put up.
Covid
Unfortunately, as the summer comes to an end, we are still dealing with Covid-19 and different variants. We are even to the point where vaccinations have become mandatory to access certain establishments or if you work in certain industries. From a business perspective, one thing that is true - certain brick & mortar companies will lose revenue from either A) people still concerned about the virus and not wanting to be in person around large crowds B) people that aren’t allowed to be there due to no vaccination C) Not enough employees because the compensation being offered is not worth the risk of coming in or time spent there. Not all, but some. You can disregard establishments that have a strong individual brand, but it may be more difficult for smaller companies that cannot operate online.
Work from anywhere - Online income
As a result of Covid, the advancement of digitalization has come quicker than most expected. Many proactive employers have changed their policies to allow Work from Home/Anywhere. Those will be the companies that will win in the end. Most people would prefer a work from home career instead of being in an office 40 hours a week. Companies that understand this and adapt quickly will be able to hire and retain the best talent. Companies that choose to live in the past will have less candidates to select from and higher turnover.
From an entrepreneur perspective, it has never been a better time to start a side hustle and for some it’s not an option. If you or your side hustle is not dependent on any physical location, that’s even better. Social Media has allowed anyone with a phone and internet to create. The barriers to entry are lower than ever. Based on your interests, hobbies or knowledge you can create content, products and services from your home. You then can market and share it with the world. Nothing is holding us back. Create/build something online! Anything!
The creator/freelance economy will only get bigger and bigger. Instead of relying on bigger corporations, with social media, people will connect with individuals directly for products, services and information. If you can get information or quality services from the best individuals in every industry or interest of yours, why do you need a large corporation? You don't. As a result in the future, probably even right now, 100k niche followers is valued more than most college degrees. The internet is the biggest wealth creator in the world right now and will only continue to grow in ways we can’t imagine.
Inflation - Cash is still depreciating
Everybody is saying this has been one of the most expensive summers ever. From gas prices to groceries, from rent prices to buying real estate and much more, prices are continuing to rise. Why? See below from “2021 Market Outlook”.
If everyone has more money, then by nature prices have to go up for supply and demand to remain in equilibrium(equilibrium AKA “Balanced”). The only problem with this is how the trillions of dollars were distributed and what individuals or businesses did with those funds. Some took advantage of all the money available and used it productively while others don’t have much left. Obviously those who didn’t need the funds were more likely to use it productively vs someone who was furloughed and needed to use the money for necessary living expenses. Like they always say, “The Rich Get Richer”.
Nobody wants to work for minimum wage anymore.
As stated earlier, liquidity seems to be slowing down meaning there is less money available. With higher prices for things like rent, gas, groceries, accompanied by many workers still displaced, this can potentially be a problem. Companies posted the highest rate of job openings in 20 years but unemployment rates remained relatively the same. No one wants to work a minimum wage job anymore that doesn’t provide for basic living expenses. People realize it’s not worth it. Instead, better freelance options have emerged such as DoorDash, Uber, Lyft, Postmates, Instacart, TaskRabbit etc. I have no clue what corporations’ are going to do but it should be interesting. The 3 options companies can do are to raise wages, use technology to automate, or outsource labor to another country. Some companies can’t afford to raise wages in the United States so that leaves them with 2 options, neither benefitting workers in the US.
Crypto/NFTs
At this point I hope we all have an idea what cryptocurrencies are. Crypto has become an entire new market (similar to the stock market) and it will only continue to grow. If you have no idea where to start, the first thing to do is open a Coinbase account. Pause and download the app right now. Learn about different coins such as bitcoin and ethereum. Learn why people find them to be valuable. Learn about Non Fungible Tokens (NFTs) and OpenSea.io. Look up projects such as CryptoPunks and BoredApeYachtClub. Type those terms into Google and YouTube and you will have unlimited information to learn more. I’ll be writing more on this soon. A lot of this is even new information to me and I’m learning more everyday as well.
How to invest right now
- VTI & SPY: With individual stocks being very volatile this year, it shows why you should have exposure to some type of diversified asset that tracks an index such as S&P 500 or follows the movements of the total market. $VTI is an etf that tracks the entire stock market and is up 22% since the beginning of the year. VTI also distributes an annual dividend of $2.80 per share. SPY is an etf that tracks the performance of the S&P 500 and is up 21% so far this year. SPY distributes an annual dividend of $5.57 per share. These are 2 options if you are looking to take less risk but still generate a positive return on your money. If you’re uncomfortable picking individual stocks then these would be best for you.
- Tech Stocks: Buying individual stocks has a lot more risk but also comes with a bigger reward. If you choose to buy individual stocks, you definitely want to invest in technology companies in growing industries or technology companies disrupting old industries. Since this is a free article, I will just list a few solid companies without explanation. Please do your own research.
- Fintech: Square, Upstart, Affirm
- Ecommerce: Shopify, Etsy
- Data: Snowflake
- Cybersecurity: Crowdstrike, Zscaler, Cloudflare
- Real Estate: Redfin
- Digital Marketing: Adobe, The Trade Desk
- Social Media: Facebook, Twitter, Snap
- Crypto: I will be straightforward and tell you I don't have all the answers here but I will tell you what I currently hold in my Coinbase account. You don’t need to own an entire coin (I definitely don’t) but you do need to get started and be invested. Bitcoin and Ethereum are pretty established. I also own and see a lot of potential with Solana and Chainlink based on their compatibility with NFTs and Defi projects. These are all speculative and higher risk investments but I've had a positive return so far. Once again, do your own research.
- Bitcoin
- Ethereum
- Solana
- Chainlink
- Internet Computer
- Cardano
Feel free to comment, DM, email or reach out with your thoughts or questions. Looking forward to hearing other ideas.
- @BallStreetCap