The Sandbox Daily (8.7.2022)
The Sandbox Daily (8.7.2022)
Friday's red hot job report, the future of EVs and input materials, and a weekly market recap
Welcome, Sandbox friends.
Today’s Daily discusses the July Bureau of Labor Statistics (BLS) jobs report released on Friday, a look at the future of EV vehicles and the upstream input materials, and a performance recap to snapshot the week in markets.
Let’s dig in.
EQUITIES: Russell 2000 +0.81% | Dow +0.23% | S&P 500 -0.16% | Nasdaq 100 -0.78%
FIXED INCOME: Barclays Agg Bond -1.12% | High Yield -0.51% | 2yr UST 3.267% | 10yr UST 2.851%
COMMODITIES: Brent Crude -1.05% to $93.92/barrel. Gold -0.06 to $1,790.2/oz.
BITCOIN: +2.51% to $23,179
VIX: -1.35% to 21.15
CBOE EQUITY PUT/CALL RATIO: 0.58
US DOLLAR INDEX: +0.04% to 106.655
Labor market shows continued strength
According to Bureau of Labor Statistics (BLS) data released Friday, U.S. employers added a whopping 528,000 jobs in July, much stronger than the 250,000 gain economists expected, and the largest gain in five months. The unemployment rate fell to 3.5%, matching a five-decade low. Wage growth accelerated to 5.2% YoY from 5.1%, while the labor force participation rate (the share of the population that is working or actively seeking work) fell to 62.1%. This strong jobs report may force the Federal Reserve to commit to another significant Fed Funds rate hike in September.
Source: Bloomberg, Ned Davis Research
High growth stocks tomorrow may not look like today’s
Traditionally, high-growth companies are involved in new, life-changing technologies. Think of the now mature high-growth companies like Apple and Google, and before them – IBM, GE, Kodak, and RCA. One of the latest high-growth technologies quickly adapted globally is electric vehicles (EV). Exponential EV growth will replace traditional gas-powered automobiles. As such, the high-growth EV industry may not necessarily be about the auto manufacturers downstream but the metal producers and miners that are upstream. The graph below shows that by 2030 the IEA expects the number of EV vehicles (teal) to grow by about 7x. The other graphs show similar growth is required of the metals used in EV batteries. In addition to artificial intelligence, nanotechnologies, and other well-known technologies, another high-growth industry of tomorrow may be Albermarle (lithium), Nornickel (nickel), Glencore (cobalt/zinc), and other mining companies few investors have heard of.
Source: Lance Roberts (Real Investment Advice)
The week in review
Stocks: The major U.S. market indexes finished mixed this week as growth names outperformed value. Second quarter earnings results for many growth names were not as weak as some analysts had feared, which has led to their reversal of fortunes for the last two weeks. Energy posted the worst return among sectors this week as oil prices tumbled to a six-month low.
Bonds: The Bloomberg Aggregate Bond Index finished the week little changed as bond investors re-assess prospects for economic growth after the strong July jobs report. High-yield corporate bonds, as tracked by the Bloomberg High Yield index, gained ground following a solid week for the Nasdaq.
Commodities: Amid energy supply challenges in Europe, West Texas Intermediate crude oil has fallen over 10% this week to price levels last seen before the Eastern European conflict. U.S. gasoline demand has softened while OPEC+ announced a marginal increase in output for September. The major metals, gold, silver, and copper, finished mixed amid concerns over demand.
Source: LPL Research
That’s all for today.
Blake
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily.