Jason Colodne of Colbeck Capital: November Market Rewind

jason colodne in a suit and tie wearing glasses

Consumers’ view of the economy and markets may have seemed a little less rosy in November, due in part to the COVID-19 pandemic’s continued effect and data that painted a somewhat mixed — although not necessarily negative — picture of the job market. 

However, the factors driving consumer uncertainty last month aren’t necessarily here to stay, says Jason Colodne, co-founder of Colbeck Capital Management, an NYC-based private equity asset management organization focused on strategic lending.

Economic Snapshot

While total employment increased, the amount by which it grew — 210,000 — was notably less than October’s 531,000 escalation, according to the latest Bureau of Labor Statistics (BLS) data.

The unemployment rate, though, fell to 4.2%, a 0.4 percentage point drop. In addition, the number of unemployed persons declined by 542,000 to 6.9 million. Both totals remain above their pre-COVID-19-pandemic levels, but are lower than the high points they reached during the February to April 2020 recession.

BLS’ data also indicated that employment in the retail industry declined last month, yet noteworthy job gains occurred in other sectors — including manufacturing, construction, professional and business services, and transportation and warehousing.

Following a rise in October, The Conference Board’s Consumer Confidence Index declined in November, falling from 111.6 to 109.5.

The organization’s Present Situation index, based on consumers’ view of current business and labor market conditions, also fell, sinking from 145.5 to 142.5 in the past month, and the Expectations Index — measuring consumers’ short-term outlook for business, income, and labor market conditions — declined from 89.0 to 87.6.

Consumers, however, seem somewhat more upbeat about the future. While only 17% said they currently viewed business conditions as good, more than half — 58% — feel jobs are plentiful, and 24% expect business conditions to improve.

In a statement, Lynn Franco, senior director of economic indicators at The Conference Board, attributed the consumer confidence decline to factors such as concern about rising prices and the Delta variant. She also said the amount of consumers who were planning to purchase homes, automobiles, and major appliances in the next six months had waned, but noted The Conference Board expects retailers to experience a positive holiday season.

After the Federal Open Market Committee’s Nov. 3 announcement that it was planning to pull back from treasury and mortgage-backed securities purchasing, minutes the FOMC released later in the month from its early November meeting indicated the policymakers had discussed concerns about inflation remaining elevated, depending on how a number of economic factors, such as the current supply chain strain, played out. Some participants also proposed the central bank might want to consider reducing its bond-buying activity at a faster than planned pace.

While the anticipated Dec. 3 debt ceiling deadline received a brief reprieve in November, the political debate about how to handle the issue remained in full force through the end of the month and into early December.

Treasury Secretary Janet Yellen extended her original estimate for the date when the U.S. would reach its debt ceiling, Dec. 3, by two weeks, explaining in a letter to House Speaker Nancy Pelosi that the deadline would be affected by the $118 billion Highway Trust Fund appropriation included in the Infrastructure Investment and Jobs Act President Joe Biden signed on Nov. 15. The appropriated funds have to be transferred within one month after the legislation’s enactment on Dec. 15.  

The Treasury Department has predicted the U.S. will not be able to pay its bills unless the government raises the amount the U.S. is authorized to borrow to fund its existing obligations by that date.

Recent Market Activity 

Uncertainty surrounding the Omicron COVID-19 variant weighed on the markets last month, according to Nasdaq findings, with only the Nasdaq 100 and Composite showing gains — and the S&P 500 finishing the month with a -0.7% return, its first time closing in the red in a decade.

The S&P MidCap 400 dropped 3.06% for the month, according to an S&P Dow Jones Indices report, bringing its year-to-date return to 21.59%. Last month, the index rose by 5.82%, and its year-to-date return stood at 21.13%.

The S&P SmallCap 600 declined by 2.42%, after also declining in September and October. The index’s downward activity resulted in a 20.04% YTD return. After increasing 5.8% in October, the Dow Jones Industrial Average shed 3.73% in November.

While the market in 2021 could be, at times, somewhat volatile, investment opportunities abounded — the S&P 500 index, for example, experienced a mostly steady climb and reached a record high point more than once during the year. 

While some analysts are predicting the bull market will continue into 2022, a number of economic, social, and political factors could potentially impact investment activity in the coming months, including the COVID-19 pandemic’s presence — which has already influenced personal income and outlay totals, although its full effect is as of yet unknown, according to the most recent Bureau of Economic Analysis release on income and expenditures.

Holiday season spending could also sway investor sentiment. While it’s still too early to know if consumer purchases will significantly augment the economy, the early results seem hopeful. 

Between Thanksgiving Day and Cyber Monday, nearly 180 million Americans made in-store and online purchases, according to National Retail Federation’s analytics. An October NRF survey found consumers plan to spend more than $900 on gifts and other holiday items this year.

Citing a rise in disposable personal income and spending over the past year, along with recent job-related and other economic growth, the retail trade association’s chief economist is predicting U.S. November and December retail sales could be as much as 11.5% higher than in 2020 — which is an upward revision of the organization’s earlier estimate of an 8.5 to 10.5% increase for the 2021 holiday season.

About Colbeck Capital

Colbeck Capital Management (colbeck.com) is a leading, middle-market private credit manager focused on strategic lending. Colbeck partners with companies during periods of transition, providing creative capital solutions. Colbeck sponsors its portfolio companies through consistent engagement with management teams in areas such as finance, capital markets and growth strategies, distinguishing itself from traditional lenders. Founded in 2009 by Jason Colodne and Jason Beckman, the principals have participated in over $22 billion of strategic investments and have extensive experience investing through market cycles at leading institutions including such as Goldman Sachs and Morgan Stanley.

About Jason Colodne 

Jason Colodne co-founded Colbeck as a Managing Partner in 2009. Mr. Colodne is the senior transaction partner at Colbeck and oversees all aspects of investment execution and portfolio management.

Mr. Colodne’s special situations investment experience runs over two decades. Mr. Colodne joined Goldman Sachs after gaining distressed investment and investment banking experience at UBS and Bear Stearns. Mr. Colodne became the Head of Proprietary Distressed Investing and Hybrid Lending at Goldman Sachs before launching Strategic Finance at Morgan Stanley. Mr. Colodne was a Managing Director at Morgan Stanley and founder of the division.

Mr. Colodne has held board seats on multiple portfolio companies and participated in numerous restructuring steering committees. Mr. Colodne is a member of the Young Professionals Organization-Metro New York (YPO), is a Board member of the Centurion Foundation, and a Committee member at the Children’s Tumor Foundation. Mr. Colodne is a graduate of the University of Pennsylvania.

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