The End of the Quarter
Wow – 3 down, one to go. Quarters that is. Did you know that we ended last week with 7 of the past 10 trading days posting 100+ point moves in the Dow? But really, it’s not as exciting when the Dow is at 17,000 versus when it was around 6,000. We had some news on the employment rate last week, and I’ve got some year-to-date stats down below, too. I’ve had a few emails asking why I have not mentioned college football in the blog yet…well, it’s because my Gamecocks are playing so poorly I can’t bring myself to even think about them on Monday.
Last week, the indices we follow all lost ground even with the comeback on Friday. Here are the weekly charts for the week.
Weekly Market Returns
Weekly Sector Returns
Jobs
Well, the market really liked the news on jobs last week. Nonfarm payrolls grew by 248,000 in September, while August’s poor reading was revised up to 180,000 from the initial report of 142,000. July was revised to 243,000 from 212,000. September’s “better-than-forecast” increase of 248,000 beat the Bloomberg consensus of 215,000 by an impressive 102,000. Here’s a chart that shows the data smoothed out a little bit. It shows that momentum has been building, and some notable progress on job-recreation has been made.
The unemployment rate ticked down to 5.9% in September from 6.1% a month prior. This is important because companies usually need employees when they are doing better. It Seems obvious, but that’s why the market gets excited over the improved reports.
However, there are some deeper factors at work. One of them is that the unemployment rate is decreasing because so many people have given up looking for jobs and there are still a ton of part-time workers who actually want to be full-time. One issue is that wages are not increasing. This is good and bad. Employment growth without wage growth is good for the bottom line of individual companies and does not fuel inflation. We have made this point a ton of times over the past few years but it’s VERY DIFFICULT to see inflation increasing without wage growth. We keep our eye on this more than anything else when considering the likelihood of inflation increasing. No inflation, no Fed rate increases…or so the thinking goes.
Returns so far this year
Here’s a chart from JP Morgan. The brown is last week’s returns and the green is year to date as of last Friday. The big thing to note in the green is how much better large cap has done relative to small cap.
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David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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