TD Ameritrade: Dave Nadig assesses the labor market
On Monday, ETF Chief Information Officer and Research Director Dave Nadig was on hand for the TD Ameritrade Network to discuss what’s happening with the job market with host Nicole Petallides.
Regarding the big concerns about the price review, Nadig explains that there are currently many factors in the job market, which could be good or bad for the investment portfolio. US Secretary of Labor Walsh recently expressed concerns about how the Delta variant might negatively impact the job market. However, it is also clear that a revaluation of work is also underway.
With the highest dropout rate on record in the past week, 71% quitting on their own in trying to find better jobs, this is clearly happening in fields such as retail and construction. These are the areas that will be constrained. Additionally, recent articles suggest that many of those who are currently working from home are not coming back.
The question then becomes what that means for an investment portfolio. It might not necessarily be synonymous with pessimism, but Nadig believes it will all have an impact on the job market. This is especially a factor for those who are trying to be as productive as before.
If labor prices are revalued by the end of the year, which sectors should investors rush to and which should be avoided? ??
– TD Ameritrade Network (@TDANetwork) 23 Aug 2021
When it comes to which investments to look at, Nadig has a few ETFs in mind. He notes that industries affected by rising labor costs historically tend to include retail, travel services and healthcare, becoming the topics of greatest concern. Nadig, however, thinks healthcare is the outlier because there is so much positive activity to come for at least 5-10 years.
With this in mind, Nadig recommends the Vanguard Healthcare Fund (VHT). It’s a solid way to gain exposure to the companies that matter to the world. “It’s hard not to be optimistic about healthcare, despite the labor shortage,” Nadig adds.
On the other side of the spectrum, Nadig doesn’t have a lot of positive thoughts on retail, especially brick and mortar businesses. The fund that could play in this is the ETF ProShares Long Online / Short Stores (CLIX), which runs on physical stores and long on online retail. It’s a trend that has already taken off during COVID and has been reinforced by this story of work.
When it comes to finance and banking, Nadig highlights how historically labor costs have been a significant problem, which has been observed at the top of the financial curve over various time periods. That said, rising rate environments will also benefit financial services as a whole. This may not be good for asset levels, but the normalization of rates should be good for the financial services industry on a relative basis.
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