Our NED, Suhail Mirza, reflects on the performances of US-listed recruiters over the past two months, and considers what impact the federal funds rate could have on the economy.
The past two months have seen virtually all of the significant listed US staffing businesses regularly covered by City Focus enjoy truly buoyant share price rises. This is despite the Federal Reserve signalling, on 20th March, that is expects no further interest rises this year due to concern about the US economy’s ability to sustain the pace of economic growth from last year.
The S&P500 has climbed over eight per cent from 23rd January to the close of markets on 21st March from 2638 to 2854. It remains 5.27 per cent up from this time last year. This handsome two-month gain has been dwarfed by many of the listed staffing businesses.
Manpower Inc (market cap of $5.15 billion) has hiked by 19.8 per cent from $71.69 to $85.85. Whilst it is still 29 per cent below its price a year ago, it has bounced back over 39 per cent from a 52-week low of $61.57 on 26th December 2018. Insperity Inc (market cap $5.2 billion) has done even better with a 23.8 per cent price rise from $102.73 to $126.97 over the two-month period to 21st March. Remarkably, it is up over 76 per cent compared to last year. Insperity shareholders will no doubt be even more pleased as its board announced, on 28th February, a 50 per cent increase in its quarterly regular cash dividend from $0.20 per share to $0.30 per share. Heidrick & Struggles has outshone even these performances climbing 24.9 per cent from $32.48 to $40.57 and is up over 25 per cent since last year.
Elsewhere, the story is generally the same; shareholders enjoying steep price rises which outperform the market. ASGN Inc (market cap $3.42 billion) has seen a 7.7 per cent rise from $60.30 to $64.94 albeit it is some 24 per cent adrift from the price of last year. Kforce (market cap $929 million) has risen by 10.8 per cent and shareholders have seen market value rise by over 28 per cent over the past year. Robert Half Inc (market cap $7.9 billion) has handsomely outperformed the market, chalking up an 11.9 per cent price rise from $59.35 to $66.37. It is some 11.25 per cent above its price of year ago.
The outliers have been Kelly Services (market cap $860 million) and AMN Healthcare (market cap $2.3 billion). The former has de facto trodden water over the past two months with the share price eking out a rise from $22.20 to $22.27; it is some 15.9 per cent above the 52-week low ($19.21) it hit on 26th December last year. AMN has fared far worse losing 22.5 per cent of market value as it slid from $63.55 to $49.24. It is nearly 17 per cent below its price 52 weeks ago.
Despite the (in some cases eye-watering) gains of the past two months and indeed over the course of the last year, shareholders will keep a close eye on macroeconomic developments that may impact the sustainability of these gains.
On 20th March, as noted above, US Federal Reserve chairman, Jay Powell, confirmed that it is seeking to hold the federal funds rate at the 2.25 per cent-2.5 per cent range that it has been in since December. There appears to be scepticism amongst monetary policy makers about whether the impressive (nearly) three per cent growth rate of the US economy last year can be extended; it is to be noted that last year saw the Trump Administration’s tax cut driven fiscal stimulus and that is a policy unlikely to be repeated any time soon.
The Federal Reserve remain focused also on potential external threats to the performance of the US economy. The on-going dispute with China remains an issue that could yet still spill over into a trade war. The farce (or is it a tragedy or both?) that is the “Brexit” process could have serious implications in the event of a chaotic and costly UK withdrawal.
This article was originally published in Recruitment International.