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-634918-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.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

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."

Advertisement
Advertisement - Article continues below

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.

Advertisement

Recommended

Visit/519858/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
Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/economy/people/600864/rishi-sunak-the-maharaja-of-the-yorkshire-dales
People

Rishi Sunak: the maharaja of the Yorkshire Dales

Rishi Sunak is taking the reins of the world’s fifth-largest economy at a crucial juncture. The unflashy but likeable youngster may be just the man fo…
20 Feb 2020
Visit/economy/uk-economy/600857/what-is-britains-new-economic-policy
UK Economy

What is Britain’s new economic policy?

At the moment, Britain doesn’t seem to have an economic policy. But radical-seeming announcements and the surprise ousting of the chancellor portend m…
20 Feb 2020

Most Popular

Visit/investments/stockmarkets/600909/will-coronavirus-kill-off-the-bull-market
Stockmarkets

Will coronavirus kill off the bull market?

It seems clear now the coronavirus will at some point go global. And when it does, will it bring down the stockmarket’s bull market? John Stepek looks…
27 Feb 2020
Visit/investments/commodities/gold/600887/gold-price-coronavirus-cost-of-face-masks
Gold

Gold, coronavirus, and the high cost of face masks in northern Italy

The price of gold is spiking – as it always does in a global panic. But this bull market predates the coronavirus epidemic, says Dominic Frisby, and w…
26 Feb 2020
Visit/personal-finance/pensions/pension-tax/600877/why-it-makes-sense-to-scrap-higher-rate-pensions-tax
Pension tax

Why it makes sense to scrap higher-rate pensions tax relief

The point of pensions tax relief is to keep you out of the means-tested benefits system. The current system is ridiculously generous, says Merryn Some…
24 Feb 2020
Visit/investments/stockmarkets/european-stockmarkets/600725/is-2020-the-year-for-european-small-cap
Sponsored

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019