Summer's Lease Hath All Too Short A Date

Next week marks the last official week of summer, ending as it always does with Labor Day.  It is ironic that we say this holiday is summer's end because at least in Chicago, September can serve up some of our best weather.  The heat's usually gone, as is the humidity.  The days are still long enough that you can enjoy the outdoors after work or on the weekend and the autumn rains generally hold off until sometime in October.  

The end of August is for many of us usually languid and bittersweet.  Time seems to slow down a bit as we enjoy this final burst of summer.  Even if the kids are back in school, it never feels like classes have officially started until after Labor Day.  We also have some time to remember what we did over the past few months or regret the things we said we'd accomplish but never seemed to get done while the weather was nice. For me it’s always seemed that a new year begins after Labor Day.  September always seems to be  when we reset our lives into the more ordered rhythm of the work and academic calendars.   Obviously the pandemic changed this last year,  but 2021 shows a nation determined to bring about some semblance and familiarity to their lives in spite of Covid’s Delta variant.

Stocks will likely be thinly traded through the holiday and the Wall Street community will spend one last jaunt at whatever watering hole they use as a summer playground.  The rest of the world will be shut away for one more week.  However, it is not as if the issues concerning the markets will go away.  Stocks, despite the major indices trading near record highs, have struggled over the summer.  Fears of a slowing economy due to Delta and the fact that government stimulus is due to wain in the coming weeks has led to price declines or stagnation in significant sectors of the markets.  I believe these fears are unfounded in the sense that the public has made up its mind to live with the disease as opposed to hide from it, while employers are desperate for workers.  This I can report.

Many of you know that for years I’ve established a summer office out in Rhode Island where I go back and forth to Chicago.  I’ve spent more time than usual out here in 2021 owing to a few weddings and other family matters.  Flights from Chicago to Providence, the nearest airport to me out here, used to be pretty regular until Covid came along. Now, it’s a lot of 6 am flying home and late-night returns.  While the travel is a pain it is a good way for me to gage the mood of the consumer and see how other parts of the economy are recovering.  I have nothing but anecdotal evidence to go by on this but I will note while out and about that restaurants are packed, malls are full, concerts are occurring and airports congested.  These things I have seen with my own eyes.   Midway airport on Wednesday looked like the day before Thanksgiving.  Thus, I’m still in the consumer is pent up camp, but there is no doubt the Delta variant has recently had a significant impact on investment psyche.  Time will tell but I believe consumer spending and economic activity will continue to surprise to the upside in the coming months.  Americans will not be locked up again, absent a more lethal variant of Covid arriving.  We will continue to adapt our lives to the virus and the economy will adapt as well.  Masks and vaccines may become a more permanent feature of our landscape but in time these will be normalized in some form as well.  All of this I believe bodes well for continued economic growth which ultimately should be good for equities.

Still, concerns over the virus and other dark events will be put on the back burner until after Labor Day.  The world will slow down one last time for a bit.  Shakespeare famously stated that "summer's lease hath all too short a date".  Those of us that live in parts of the country where we actually get months of cold weather know true well the meaning of his words.  Summer goes by so quickly for most of us.  It seems like only yesterday when we were getting ready for Memorial Day.  Now September is nearly upon us while football, the true herald of autumn, starts this weekend!   I'm a bit out in the country when I'm in Rhode Island.  The little place where we stay was once a farm.  We dodged a hurricane earlier this week and while the only damage was to some trees, nature has a bit of a beat up feel to it.  Trees leaves look battered and bruised with a hint of brown to them.  They look sleepy as if recovering from a shocking experience.  Perhaps because of that you can feel summer waning away now.  The days aren't as long as they were a few weeks back.  The light looks a bit different at dusk as the sun hangs lower in the sky then it did just six short weeks ago.  Nights are going to be a bit crisper here over the weekend, serving up a reminder that the principal season of the north is not the one you're currently in.  Crickets, the other heralds of autumn, now chirp incessantly throughout the day.  It is time to take a break and enjoy these things one more time and smell those last roses of summer.  Whatever issues we have will now wait till the clock rolls into September.  Probability still suggests we’ll see a return of some volatility into the fall, but I am still in the camp that any declines it might bring about would mean we should go look for some bargains, given what we currently know about things.

Finally, Afghanistan deserves a quick mention.  Afghanistan is so far a political crisis but not an economic one.  Markets have therefore ignored its implications so far.  This remains true even after the tragic events of yesterday.  Longer-term Afghanistan has the potential to be a negative from a geopolitical perspective.  Let’s wait and see how the dust settles  before commenting on this any further.  Perhaps the subject of a future letter.

Till then let’s enjoy what’s left of summer.  Looking forward to catching up after the holiday.