by Franklin J. Parker, CFA
Last week was a big data week, but it was Job numbers that took center stage, with a quarter million jobs created last month. Expectations were more in the 140,000 range, so this was a big surprise. The unemployment rate dropped to 4.1%. Of course, rather than simply take the good news, investors are viewing these figures through the lens of “how does the Fed react to this”? Bond rates adjusted quickly higher, and the assumption is now that the Fed will cut rates slower than originally planned.
We also had services figures come in better than expected, showing expansion, but factory orders were negative.
With the close of the third quarter, investors will now be turning their attention to earnings with PepsiCo kicking off this week. With the economic data now showing mixed signals, any “soft landing” will need to be confirmed by corproate earnings. Without solid growth there, the all-clear signal can’t really be rung.
All-in-all I am still cautious, but last week’s data was a good sign. Job creation is strong, and the expansion of the services sector is a positive. Of course, valuations are still stretched (a topic we covered last week), but if we get strong earnings growth, I might start to ease back into a more optimistic view of the next 12 months. Stay tuned — the next few weeks will be important!
Chart of the Week
With inflation coming down and strong employment figures, we have seen a slow but steady climb in our “Is Life Getting Better” index. The rise has been slower than pre-Covid years, but has been substantial nonetheless.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.