Stagflation? Inflation? Recession? - What should we do? Nothing.
Updated: Feb 10
“I know, I know. The US economy is in danger. You don’t have to keep telling me.” – I shout at the telly most days.
During COVID, tech stocks surged as people bought more hardware and downloaded more software. Shoppers were denied access to the malls and high streets, so the online, big box and delivery firms benefited massively. Those of us with a bit of Apple, Amazon, Microsoft and FedEx in our portfolios made a nice little earner.
Since we started learning how to live with the pandemic, travel, hospitality and energy businesses had started to see some recovery, but the conflict in Ukraine and the knock-on effects of energy insecurity and supply chain disruption, especially in secretive China, have dampened down any green shoots of recovery.
The situation has now been made worse by Americans adopting a more European attitude to the great institution of work.
For generations, Americans’ Protestant Work Ethic told them labour and toil are good for your body and soul. This was the dominant philosophy.
Plus, a social security system - or rather the lack of one - made work and employment a necessity if you wanted pensions, healthcare and other benefits. And unionised job security with a predictable income stream, allowed access to mortgages and car loans, plenty of flash stuff on the never-never courtesy of Visa and Mastercard. We’d never had it so good.
But when the COVID lockdown occurred, millions and millions of jobs were lost. Employees in restaurants, hotels, vacation businesses and tourism centres were let go, big businesses were paid to furlough staff, and mom and pop stores closed.
More employees were let go or walked out because they wouldn’t comply with Covid mask and inoculation mandates, and millions more moved from going into the office to working from home, meaning the millions of cleaners, bus drivers and food service workers who catered for them were dispensed with too.
Now America wants all those workers back. There are Help Wanted adverts everywhere.
But many aren’t so keen. “No thanks,” they are saying.
Rather than scurrying back to jobs with low pay, poor job security, and unsocial hours they are coming over all un-American - “Nah. I’m happy doing a bit of delivery driving, dog walking and landscape gardening with my cousins.”
Que se passe-t-il? As the French might say.
The old adage about Europeans ‘working to live’, seems to be catching on.
So, to tempt Americans back into hot kitchens, dirty bathrooms and dark warehouses, restaurants, hotels, factories are having to pay. Lots.
And that means they’re having to charge more for their services, plates of food and widgets.
So, the cost of raw materials is up, the price of energy is rocketing and now labour costs are rising too.
This week, some of the businesses who we once thought of as immune to the excesses of market fluctuation took big hits. Walmart announced they weren’t sure they were going to make the profits they’d been telling everyone they would all year. Their stock fell by double digits. Not to be outdone, its retail park competitor Target also warned it wasn’t really going to be rolling in dosh after all and saw its share price shed 25%. Fear breeds more fear, so Walmart’s stock got a second tanking on what Target had said.
Of course, all this has happened before, and economic worries are probably just as real in Liverpool, Lisbon and Limerick as they are in Memphis, Minneapolis and Miami. But here, we are blasted with the news – and the interpretation of it – on a 24-hour rolling news cycle.
Every morning, the TV stations are replete with big haired-women and shiny-pated men telling us that today could be the day when the slow down tips over into a recession. Cue fancy graphics and a headline – “Market Armageddon”.
There aren’t any fireworks or flashing lights, but you get the feeling they can’t wait for it to happen. This is their moment.
And, for those old school types who still go to work, when we get back in the evening, the same commentators and chatterati are back explaining what went wrong today, and how tomorrow could be the day it actually happens.
Of course, if everyone is constantly saying the sky is going to fall in, that consumer confidence – polite slang for how much debt normal people are willing to shoulder – is low, then it probably will eventually happen.
In the darker corners of the economy, rumblings are afoot too.
Crypto, the very dodgy sounding alternative to real money, has seen some coins shed 99% of their value this week and even the darlings of the business TV and news reporters – Tesla’s Elon Musk and Goldman Sachs CEO David Solomon - are saying a recession looks inevitable.
So, what’s to be done? Nothing.
I’m taking the advice of Warren Buffett, the 90-something-year old boss of Berkshire Hathaway.
Turn off the TV. There is no point getting all frantic every morning and again in the evening for things you can’t meaningfully impact.
Yes, prices at the gas pump are up. Yes, the weekly shop is a tenner more than last week, and the value of the ISAs, 401Ks and Pension pots we have all so diligently been stashing cash into are worth less today that yesterday if I was going to cash them in.
But I wasn’t going to cash out was I.
I was going to leave them exactly where they were whether the market was booming as it has been for the past decade or more, or if it’s sliding south as it is now.
Why would I start taking money out? What would I do with it? Stuffing it under the bed isn’t going to help with inflation running at 7% and more.
While I am entirely unqualified to give any reliable financial advice to anyone, my contribution is to stop checking your portfolio prices, drive a bit less aggressively and in the words of comedian Micky Flanagan, shop supermarket own brands – ‘Same taste, only cheaper’.
The reality is: it is out of our hands.
The Federal Government will fiddle around the margins to make any recession mild, or milder.
We will watch the Russian atrocities for a few more months until Putin mysteriously dies, and we all happily start importing Russian gas again and if you have a few bob hanging around, look forward to the buying opportunity the late Summer will offer as the TV Big Wigs and Shiny Domes start talking about their other favourite forecasting trope – The Santa Rally!
This article was originally published in A Week in America