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Bloomberg - Share Prices Outperform Despite Higher Labor Costs

By Lu Wang and Vildana Hajric - September 2, 2021

David R. Kotok - In the News


Wage growth has become a concern as traders watched the Covid-19 pandemic disrupt the labor market and supply chain, fueling cost hikes in everything from computer chips to commodities. According to Goldman estimates earlier this year, an increase of 100 basis points in wage growth likely amounts to a 1% reduction in company profits.

David Kotok, chief investment officer at Cumberland Advisors, says his firm is preparing for a disappointing third quarter, putting more money into cash and defensive shares like health care.

“We don’t know what the next couple of months’ labor force reports will reveal. But we don’t like the anecdotes we are seeing,” Kotok said. “We are collecting them from around the nation daily and they are not a pretty picture.”

Yet for now, angst over wage pressure is hard to find in the ranks of stock winners and losers. The basket of 50 stocks with high labor costs is up almost 7% this quarter, with two-thirds of the members rising. By contrast, the low-cost basket, tracking the likes of Discovery Inc. and Western Digital Corp., is flat with more than half the members mired in losses.

Read the full article at the Bloomberg website: https://www.bloomberg.com/news/articles/2021-09-02/higher-labor-costs-no-longer-a-stumbling-block-for-stock-traders

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David R. Kotok
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