Editor's letter

A tough week for investors

Stock markets have heaped plenty of woe on investors this week, says John Stepek. At least workers have reason to be cheerful.

918-lorry-634
Keep on trucking: drivers are in short supply in the US
918-MW-300

Earlier this month, Amazon raised its minimum wage for both British and American workers, and said that it plans to lobby the US government for a higher federal minimum wage. Now the US's largest trucking company J.B. Hunt Transport Services says that in the past 12 to 18 months, it has lifted wages by around 10% due to an industry-wide shortage of drivers.

It's been so long since we've seen sustained wage inflation that most people still can't quite wrap their heads around the idea. And it's only just starting to make itself felt in the official data. But this is worth paying attention to. As I outline in this week's cover story, the recent turbulence we've seen in the US and global markets has been driven primarily by nerves over rising interest rates. Rising rates, in turn, are being driven to a great extent by markets starting to wake up to the fact that we're no longer at imminent risk of plunging into deflation.

Why are big, forward-thinking, employers such as Amazon and J.B. Hunt paying people more? For the same reason that you pay more for any other service or product because you have to. Unemployment in both Britain and America (and Japan, for that matter) is now at multi-decade lows. For several years after the 2008 crash, most people were grateful just to have a job. Now they can pick and choose.

As a result, if you want to recruit the best staff and you want to hang onto the staff you've got you have to offer them more. As retail consultant Gerald Storch told CNBC, Amazon has put its rivals on the spot. "I cannot believe that others aren't going to follow suit very rapidly. If you don't, you have a demotivated workforce. So the retailers who can afford to are absolutely going to get there a lot faster than they were going to."

This is good news. We've been pointing out for years now that one big driver behind today's political upheaval is the fact that while asset prices have soared, pay packets have not. Capital has won out, while labour has seen its fortunes stagnate. That needed to change and it is. However, it means that those on the other side of that equation investors among them need to be prepared for more turmoil. See our cover story for our take on how to adapt.

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Is London’s office market a bargain?
Property

Is London’s office market a bargain?

Private-equity groups are swooping on London’s property companies, which are trading on steep discounts to net asset value.
23 Oct 2020
Big spending government is here to stay – just ask Rishi Sunak
UK Economy

Big spending government is here to stay – just ask Rishi Sunak

Governments around the world are splashing huge amounts of cash as they do “whatever it takes” to prop up their economies. John Stepek looks at where …
23 Oct 2020
Why negative interest rates are a lousy idea
UK Economy

Why negative interest rates are a lousy idea

The Bank of England’s governor says negative interest rates can encourage investment rather than having cash stashed in the bank. But is that really t…
22 Oct 2020

Most Popular

Why commodities could be the best investment for 2021
Commodities

Why commodities could be the best investment for 2021

There’s plenty for investors to worry about right now. But things will inevitably recover. And the sector most likely to do best when they do, says Jo…
22 Oct 2020
Negative interest rates and the end of free bank accounts
Bank accounts

Negative interest rates and the end of free bank accounts

Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK bankin…
19 Oct 2020
Buying bitcoin could be the best way to play the remote working boom
Bitcoin

Buying bitcoin could be the best way to play the remote working boom

The coronavirus pandemic has accelerated the move to home working, flexible employment practices and the rise of the “digital nomad”. One of the best …
21 Oct 2020