Tennis

Friday’s employment report had the risk-on crowd up on their feet. Unemployment rate down, hours worked up. Indeed average hourly earnings increased at a recently unheard of 5% annual clip, and the ‘income proxy’ – think hours worked multiplied by average hourly earnings – surged. This matters as the income proxy drives wages and salaries which drives consumer spending. And consumer spending is GDP. Well, almost. The retail moguls must be eyeing up Black Friday and muttering in the canteen that maybe the whole discount thing might not be necessary this year. For those employers eyeing up the holiday season who want some extra help behind the till though, the outlook is a bit more sticky. The NFIB’s job openings index looks like the price chart of a recently made-up cryptocurrency. It’s gone parabolic. A record high. And a record high by a very wide margin. There is, though, hope. The not-so-well-known Employment Diffusion Index, that being an index that measures the breadth of hiring and is a leading indicator on the jobs market, suggests more labour supply will be coming online soon. This will cool wage inflation and alongside rising productivity help smooth the side partings in the boardroom. When the game-changing news of Pfizer’s COVID pill is taken into account, prompting health tsar – and Pfizer board member – Scott Gottlieb to holler and fist pump and call “the end of the pandemic”, the runway for further economic boom-time grows ever longer. This, then, should help shift the market infatuation away from a narrow cohort of companies that have dragged the S&P 500 to record highs and put some wind up those stocks that are more a play on a traditional economic reopening. Languishing on a subdued valuation this is no more relevant than for the med-tech leader, Zimmer Biomet. Hospitals, rightly, have been less enthusiastic than theme parks and casinos to return to a go-anywhere, do-anything mantra for visitors and the ongoing COVID restrictions are impacting the expected volume recovery for Zimmer, purveyor of all sorts of products that help those in need, get back on the tennis court and bowling alley. Think new hips and new knees. As the vaccines, and the pills from Merck and Pfizer, help ease society back to some sort of normality, those still laid up at home watching Netflix are going to be rushing back to a hospital waiting room to get all fixed up. A holiday is discretionary, a new hip is not. Which suggests the shares of Zimmer look ripe for the taking.