September is typically a tough month for stock markets. October can be even more difficult. And there are plenty of reasons why investors should be wary. After a stellar run, equities appear primed for perfection. Fatalities from Covid-19 have averaged more than 1,500 over the last four days in the US (August 31st – September 5th). Jobs growth stalled in August according to the Bureau of Labor. Concerns over squeezed margins persist, with raw material costs and delays in transportation compounding labor shortages. The serious long-term costs of climate change were driven home again this week with Hurricane Ida and flooding in the North-East of the US.
However, there is another side to the story. Investors have switched their focus to information technology (again). The pressure on labour costs provides an opportunity for ‘tech’: investment in IT will accelerate as companies pursue automation. The biggest performer in the S&P 500 IT index last week was ServiceNow, which rose 7.3%. The software and cloud computing company is helping clients to maximise IT investment, optimise productivity. ServiceNow is using AI and machine learning to track workflows, thus predicting and preventing operational difficulties. Anticipating and ironing these out allows companies to deliver reliable services at scale. With its cutting-edge technology, US companies have the innovation and tools to keep total costs under control.
Summary
- Payrolls fall short of expectations
- Wages are rising in key sectors affected by shortages
- IT will determine if US inflation stays under control
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