Prices rise as inflation concerns grow. Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), and Wells Fargo (NYSE:WFC) reported earnings. Delta (NYSE:DAL) reported its first profit since 2019, and McCormick (NYSE:MKC) hired a taco czar. In this episode of Motley Fool Money, Motley Fool analysts Andy Cross and Jason Moser discuss those stories and weigh in on the latest from Disney (NYSE:DIS), Netflix (NASDAQ:NFLX), Pepsi (NASDAQ:PEP), and UnitedHealthcare (NYSE:UNH). Also, our analysts share two stocks on their radar.
Plus, we revisit our interview with NYU Professor of Psychology Emily Balcetis, author of Clearer, Closer, Better: How Successful People See the World.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on July 16, 2021.
Ron Gross: Earnings season just started to heat up. Today we’re going to talk about big banks, airlines, and video games. But we begin with everybody’s favorite macroeconomic metric; inflation. Andy, you can’t turn on the news without hearing about inflation, and whether it’s transitory or more permanent PPI, CPI, there’s a lot of macroeconomics out there so my question to you is, what should investors be thinking about here and should they be concerned?
Andy Cross: Well, Ron, from the expectations for the investor side, I think inflation matters the most when I start seeing it really creep up in employee costs salaries, because employee costs now are somewhere; gosh, it continues to increase 20%, 40%, 50% or so, depending on the company of revenues and it gets to be a very sizable amount if we start seeing increases in employee costs. Now the CPI, the consumer price index, the core which strips out the volatile food and energy prices, has been running very hot as it has been reported. It was up 5.4% in June year-over-year. That’s the fastest in 13 years. You’re starting to see uptake in expected inflation from consumers, so people are starting to feel this as well. But that’s the stuff at J. Powell was talking about; being a little bit more transitory, a little more temporary, things that go into like used auto cars, are a big part of this increase of up to a third of the increase we’re seeing recently.
We see a lot of that conversation, but what I personally think investors need to continue to focus on is how companies manage their employee costs. We know hiring is very tight right now, and we know there’s a lot of job openings out there that are not getting filled. We’re starting to see companies having to start increasing their salaries and they actually offer bonuses to recruit people into the workforce. As that starts to work, that could actually hit a little bit of the margin side for companies, so I think investors should be focused on that. What we’re hearing right now, I think that is for the most part, will ebb and flow with the reopening of the economy, but longer-term is that it’s more of that focus on the employee costs that I’m looking at.
Gross: Jason, before the show, you were talking about inflation like we do about some of other macroeconomic indicators, and that it’s maybe sometimes best to just ignore them and just stick to your knitting. Is that your thinking here, your guidance for investors?
Jason Moser: Well, yes and no. I think that ultimately the way we look at it and obviously we take a much longer term perspective here at The Fool than perhaps the traditional Wall Street banks, I think that affords us the ability to be patient and to not worry so much about the ebb and flow of things like inflation. I often compare it to foreign currency effects. We’ll see foreign currency effect adjustments in earnings releases quarter-in and quarter-out. That…