The Sandbox Daily (9.12.2022)
Worker productivity vs. compensation, Apple, and inflation expectations
Welcome, Sandbox friends.
Today’s Daily discusses the historical relationship between worker productivity and compensation, Apple’s latest hardware cycle, and inflation expectations continue to drop.
Let’s dig in.
Editor’s note: Future Proof
Part of the Sandbox team is currently attending the Future Proof wealth management conference in Huntington Beach, California, featuring speaking panels across a variety of investment and technology topics, live podcasting, and product and service demos from the industries’ most well-respected thought leaders, independent research firms, technology developers, and service providers. More information can be found the Future Proof website here.
Here are a few pictures from Days 1 and 2, including the absolutely wonderful Bob Pisani of CNBC and the thought-provoking Josh Brown of Ritholtz Wealth Management.
Markets in review
EQUITIES: Russell 2000 +1.23% | Nasdaq 100 +1.20% | S&P 500 +1.06% | Dow +0.71%
FIXED INCOME: Barclays Agg Bond -0.14% | High Yield +0.28% | 2yr UST 3.549% | 10yr UST 3.337%
COMMODITIES: Brent Crude +0.83% to $93.15/barrel. Gold +0.27% to $1,727.6/oz.
BITCOIN: +2.67% to $22,215
US DOLLAR INDEX: -0.08% to 108.246
CBOE EQUITY PUT/CALL RATIO: 0.57
VIX: +4.74% to 23.87
Workers left behind?
U.S. productivity has increased at a steady rate since the 1950s. That means we are extracting more value each year from our labor, equipment, and raw materials. From 1950 to the mid-1970s, average worker compensation kept pace with productivity improvements. Put another way, the financial reward of productivity gains were shared by those doing the actual work.
However, in the past 50 years, productivity and wages have decoupled. While productivity grew 72% between 1973 and 2014, hourly worker compensation grew just 9%. That left worker compensation at less than half of what it would have been had the two remained coupled – much the same way they had tracked each other throughout earlier economic cycles. So, did corporations and shareholders benefit at the expense of its very workers driving the business?
Source: Scott Galloway
Apple launches its latest hardware cycle
Apple's latest hardware launch — including the traditional fall iPhone cycle — took place last week. Millions tuned in to see the iPhone 14 and a refresh of Apple's most-popular wearables, including new AirPod Pro's and a more resilient Apple Watch.
Critics will complain that, even with some cool design updates, the iPhone 14 is more of an evolution than a revolution on the product side. That's a fair critique — and one that's been levelled at Apple many times since Tim Cook took over as CEO from Steve Jobs in 2011. The strongest rebuttal to that criticism is seen in the chart below: during Cook's tenure sales have more than tripled and the company's share price is up more than tenfold.
While the product line-up may not have changed dramatically, Apple's Services division is undergoing a revolution. Services include the App Store, Apple Music, Apple Pay, Apple TV and a new area of intense focus: advertising. Just 18 months since Apple made major changes to its privacy policy via app tracking, which made it harder for digital ad platforms like Facebook to target ads at users, they're now beefing up their own advertising effort. The company is reportedly looking to double its advertising workforce, suggesting that even Apple can't resist the high margin temptation of selling advertising space on its most valuable properties.
Source: Chartr
Inflation expectation continue to drop
There's an encouraging sign Americans view painfully high inflation as a temporary phenomenon: another sharp drop last month in how steep consumers expect inflation to be in the years ahead, according to the New York Fed's Survey of Consumer Expectations, out this morning. In fact, expectations for the level of inflation over the next year fell by ~0.50% in August — a historic monthly decline in the survey's nine-year history, second only to July's record-breaking drop.
One of the Fed’s primary concerns is that consumer expectations for steep inflation will become a mainstay of the economy – anchored in such a way it shifts the status quo that we’ve come to expect over the last 10-20 years – and which could force them to act in ways that would help inflation spiral upward. That worst-case scenario does not appear to be materializing.
Source: Axios
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.