The extended Labor Day weekend afforded me the opportunity to re-watch one of the classic movies from the ’80, The Breakfast Club. The title of today’s report is a quote from that movie and when I heard it, it made me think of the recent economic news and market action – I thought it was appropriate for today’s truncated weekly Monument Wealth Management blog & email update.
Across the board, the equity market indices finished up last week. The Dow Jones Industrial Average (DJIA) gained 2.98% to finish the week at 10,448, the S&P 500 Index gained 3.75% to finish at 1,105 and the Nasdaq Composite Index gained 3.72% to finish at 2,234. The Russell 2000, which measures smaller capitalization stocks, gained 4.31% to finish at 643.
For the month of August, the DJIA lost -4.3%, the S&P 500 lost -4.7% the NASDAQ lost -6.2% and the Russell 2000 lost -7.5%.
As we mentioned last week, and as the title of today’s report suggests, the stock market has a rather muted view on the economy. After a horrible August, the equity market sprang back to life the final two days of last week on some positive, albeit muted, economic news surrounding the jobs report and the ISM Manufacturing report. As our readers know, we feel the Institute for Supply Management (ISM) manufacturing report is important to gauge whether or not the economy is in forward or reverse and also determines if we are speeding up or slowing down.
The ISM said its manufacturing index rose to 56.3 in August from 55.5 the prior month. Faster growth in production, employment and inventories were responsible for pushing the index higher last month. Additionally, pending home sales grew an unexpected 5.2% in July. Finally, while job losses continued to rise in August, the pace of loss fell more than expected. The increases in hours worked and overtime hours in manufacturing probably imply that more hiring is likely down the road.
This pace of private sector job growth is probably not going to decrease the unemployment rate, but in our opinion it does not suggest that the economy is heading to a double-dip recession either. We acknowledge the economy is weak, but there is some good news out there. In an environment where there is laser focus on the bad news, it’s constructive to look at how the market reacts when there is good news. And if this paltry amount of good news is responsible for a 5.3% rally over the first 3 days of September, I’m looking forward to more of it.
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Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC
**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generall representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.