The August payroll report was a disaster… how Louis Navellier sees it impacting the Fed … more Fed “help” is just helping rich people … final call for Luke Lango

 

Last Friday’s payroll data bombed.

The Bureau of Labor Statistics’ nonfarm payroll data for August reported 235,000 new hires.

The expectation was for 720,000.

If we dig into the numbers, the main reason for the colossal miss was weakness in two sectors: retail, and leisure and hospitality.

The retail sector lost 29,000 jobs. And after averaging 350,000 new hires for the last six months, the leisure and hospitality sector went negative, losing 42,000 jobs.

For more on the overall impact, let’s turn to legendary investor, Louis Navellier, editor of Growth Investor.

The truth of the matter is that the U.S. economy has lost 5.3 million jobs since the pandemic commenced, and there is now an acute labor shortage.

The labor shortage is weighing heavily on the Federal Reserve’s mind, and it is the main reason why the Fed hasn’t taken steps to curb rising inflation.

In the wake of the August payroll report, the Fed’s Federal Open Market Committee (FOMC) statement on September 22 will be more important than ever.

Remember, the Fed’s main priority today is job growth – not inflation.

It was only a few weeks ago, when speaking at the Jackson Hole central bankers’ symposium, that Federal Reserve Chairman, Jay Powell, said though inflation is well above the Fed’s 2% target rate, “we have much ground to cover to reach maximum employment.”

That ground grew more expansive last Friday.

Back to Louis:

I suspect the FOMC will likely continue to use the COVID-19 Delta variant as an excuse to kick the can down the road and defer any tapering announcement.

The fact that the Fed is failing in its unemployment mandate and hasn’t been able to replace the 5.3 million jobs lost during the pandemic likely irritates the doves of the FOMC. 

And so, with the Fed focused on jobs, not inflation, it’s likely to continue the status quo after the horrendous jobs report. But there would be an irony to this…

The related inflation that the Fed is ignoring as it pursues employment goals will hurt the very people who need the most help, while further enriching those with assets.

***Who has really benefited from Fed policies

One legendary investor not shy about calling out the Fed is Stanley Druckenmiller. Having worked with George Soros, Druckenmiller is one of the greatest traders of all time. He built Duquesne Capital to more than $12 billion in assets before shutting it down about a decade ago.

From Moguldom, this past spring:

When Federal Reserve Chairman Jerome Powell talked recently about his plans to visit a homeless camp near the federal building, it got the attention of billionaire fund manager Stan Druckenmiller.

“I don’t think there has been a greater engine of inequality than the Federal Reserve Bank of the United States in the last 11 years so hearing the Chairman (Powell) talking about visiting homeless shelters is very rich indeed…” Druckenmiller said while speaking to The USC Marshall Center for Investment Studies’ Student Investment Fund Annual Meeting on a Zoom call…

The people that benefit from money printing are rich people who know how to navigate the market, Druckenmiller said. “I just had the best year I’ve had in 15 years last year. Everyone wealthy I know is making a fortune and why are we making it? Because this guy is printing money like there’s no tomorrow. The kids in Harlem in my opinion are not benefiting from money printing but Stan Druckenmiller and other wealthy people are.”

Be this as it may, the poor jobs number last Friday suggests we’re in for more of the same – at least for a while. As investors, it’s critical we recognize this.

***The Fed has helped create record new wealth  

U.S. billionaires grew 62% wealthier during the pandemic. That’s a collective $1.8 trillion increase.

But it’s not just billionaires who are enjoying the benefits of the Fed’s easy money policies. Over the last year, practically anyone with assets has seen their net worth grow.

From CNBC:

Although many Americans continue to face financial uncertainty due to the pandemic, the outlook for retirement savers is only improving.

Retirement account balances, which took a sharp nosedive in 2020 when the coronavirus outbreak caused economic shock waves, are now at new highs, according to the latest data from Fidelity Investments, the nation’s largest provider of 401(k) savings plans…

The number of Fidelity 401(k) plans with a balance of $1 million or more jumped to a record 412,000 in the second quarter of 2021. The number of IRA millionaires increased to 342,000, also an all-time high.

Together, the total number of retirement millionaires has nearly doubled from one year ago.

On the other hand, what about the millions of people who are lost jobs and find themselves in dire situations?

Well, they’ve received government assistance through stimulus checks and social safety programs. But they’re now paying for it via the “stealth tax” of inflation.

And yes, we’ve all heard that inflation will be transitory. But we’ve already had many months of this “transitory” inflation yet it’s still climbing. Plus, depending on the sector, there’s reason to believe inflation will be around well into 2022.

Meanwhile, as Druckenmiller said, “inflation is going to hurt poor people a lot more than rich people.”

***While you can’t change the Fed’s policies, you can benefit from them

This means having your wealth in assets that are going to be inflated under these market conditions.

Stocks are Louis’ choice.

Back to his update:

Personally, I still don’t look for the Fed to make any adjustments to its quantitative easing and key interest rate policy until 2022.

As a result, the “Goldilocks” environment of ultralow interest rates, an accommodative central bank and robust economic growth will persist and should continue to support higher stock prices this month.

That said, history suggests a tough September for investors.

Here’s Louis with those details:

It likely won’t be a straight ride up for stocks.

According to Standard & Poor’s and Haver Analytics, the S&P 500 has declined an average 1.0% in September between 1928 and 2021.

The analysts at Bespoke also recently reported that the Dow has posted negative gains on average in September over the past 100, 50 and 20 years.

So, we might be on the verge of another bumpy month.

In fact, as I write Wednesday at lunch, the markets are down, though they’ve clawed back from their lows. But as Louis just noted, this is business as usual for September.

In the bigger picture, temporary selling pressure is no match for the market-effects of a dovish Fed chairman who now has yet another reason to keep the printing presses going.

We’ll keep you updated on the September FOMC meeting here in the Digest.

***Before we wrap up, if you’re looking for specific stocks to play this Fed-fueled market, today is “last call” with Luke Lango

In late August, Luke held a special event called the “1 to 30 Wealth Summit” which was all about cutting-edge technology and how to invest in it.

During the evening, he introduced a 1 to 30 Hypergrowth Portfolio. Right now, it contains nine stocks. Luke is adding the final holding today.

Even with the recent market pressure, all but one of the stocks are showing gains. The entire portfolio is up an average of 10%. It’s a strong start to what Luke believes will be enormous long-term gains from tomorrow’s leading tech companies.

The replay of the 1 to 30 event is going offline today. So, I encourage you to click here to watch the video before it’s taken down.

As to the Fed, tapering, inflation, and September market weakness, we’ll keep you up to speed here in the Digest.

Have a good evening,

Jeff Remsburg