On Monday, ETF Trends CIO and Director of Research Dave Nadig was on hand for the TD Ameritrade Network to discuss what’s happening with the labor market with host Nicole Petallides.
As far as big concerns about repricing, Nadig explains how there are many factors in the labor market currently, which could be good or bad for the investment portfolio. U.S. Labor Secretary Walsh recently expressed concerns about how the Delta variant could negatively impact the labor market. However, it’s also clear that a repricing of labor is also going.
With the highest quit rate ever-printed in the last week, 71% quitting of their own volition for the sake of trying to find a better job, it’s clearly happening in areas such as retail and construction. These are the areas that are going to be constrained. Additionally, recent articles suggest that many who are currently working from home are not going back.
The question then becomes what this means for an investment portfolio. That may not necessarily spell doom and gloom, but Nadig believes all of this will have some impact on the labor market. This is especially a factor for those trying to be as productive as they were before.
If labor reprices by year end, which industries should investors flock to and which should be avoided? 🤔
— TD Ameritrade Network (@TDANetwork) August 23, 2021
As far as the investments to look into, Nadig has a few ETFs in mind. He notes that industries impacted by rising labor costs historically tend to include retail, travel services, and health care becoming things with the most concern. Nadig, however, believes healthcare is the outlier, as it has so much positive activity coming its way for at least another 5-10 years.
With that in mind, Nadig recommends the Vanguard Health Care Fund (VHT). It’s a solid way of getting exposure to the companies that matter to the world. “It’s hard not to be bullish about healthcare, despite the labor shortage,” Nadig adds.
On the otherside of the spectrum, Nadig doesn’t have many positive thoughts on retail, specifically brick and mortar businesses. The fund that could play in this are is the ProShares Long Online/Short Stores ETF (CLIX), which goes short the brick and mortar stores and long on online retail. It’s a trend that’s already taken off during COVID and has been bolstered by this labor story.
Looking over to finance and banking, Nadig points out how, historically labor costs bear a large problem, which has been seen at the top of the finance curve over various periods of time. That said, rising rate environments are also going to be good for financial services overall. It may not be great for asset levels, but the normalization of rates should be good for the financial services sector on a relative basis.
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