Job Growth Brings Optimism

Jul 7, 2017   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

While this week was slightly positive for the markets, it was somewhat lackluster most likely because we are on the precipice of earnings announcements due out in the coming weeks.  While most headlines were focused on news of North Korea’s launch of its first ICBM missile, and who won the handshake competition between President Trump and President Putin at the G20 summit, there was noteworthy news that wasn’t covered.  Let’s take a few minutes to review the other news that happened this week.

Perhaps the most important news is that the labor market roared back in June, with a hefty monthly gain in jobs, and revisions added 47,000 more jobs in April and May than previously reported. Over the past three months, job gains have averaged 194,000 a month. Although the unemployment rate ticked up from the previous month, it did so because more people joined the workforce.  While the payroll number was well above expectations, the wage numbers were weaker than expected.  Economists expect wages to rise at an even faster pace because the unemployment rate is near a post crisis low, and so there should be more competition for skilled workers. But some Federal Reserve officials have noted that the lower unemployment rate is not lifting workers’ pay the way it used to partly because productivity is lower.  Either way, today’s news gives cover to the Fed should they decide to continue raising interest rates.

Along similar lines, the Federal Reserve released the minutes from its latest meeting and while it may be on the path to normalizing interest rates, there is little consensus on when to start paring down its massive balance sheet.  To shrink the nearly $5 trillion balance sheet, the Fed said it plans on gradually allowing fixed amounts of assets to roll off without reinvestment, and raise the caps on these amounts every three months.  While some of the voting members prefer clear communication on balance sheet reduction, others favor waiting until later this year, believing a move now would signal that the Fed is getting more aggressive.  So while an interest rate hike or two remain likely before the end of the year, how to resolve the Fed’s huge balance sheet remains a bit of a mystery for now.

One sector that did well this week is the defense sector.  Defense stocks are on the rise after North Korea launched its first ballistic missile capable of reaching the continental U.S.  Its actions may cause the U.S., Japan, and South Korea to fund missile defense at an above average rate, according to a Jefferies analyst.  Additionally, Poland agreed to buy the Patriot missile defense system from the U.S., in a deal worth up to $7.6 billion.  While opinions span the spectrum on President Trump, his policies influence not just the market but individual companies as they relate to his agenda.

In closing, I bring you a scandal of the highest proportions.  Well, maybe not that big but worth noting nonetheless.  A couple months back, we learned that Tom Price (R-GA), President Trump’s nominee to be Health and Human Services Secretary, was under investigation for having bought shares in a tiny biotechnology company while sitting on a committee that influenced the firm’s prospects.  Shocking, you say?  A recent study found that 28 House members and 6 Senators each traded more than 100 stocks in the past two years, placing them in the cross hairs of a conflict of interest on a regular basis.  Before you get out your pitchforks, it should be noted that 384 House members and Senators who served in the 114th Congress made no stock trades over the past two years.  While Congress passed a law just five years ago to curb lawmaker insider trading, it seems there is no enforcement of said law.  And while it isn’t common practice, this most recent report indicates there’s more work to be done.  Now you know.

July 7, 2017

Comments are closed.

Certified Financial Planner Board

CERTIFIED FINANCIAL PLANNER™ certification is recognized as the standard of excellence for competent and ethical personal financial planning.

Financial Planning Association

Members commit to objective, client-centered, and ethical financial planning.

Financial Times 300

The Financial Times presents the FT 300 as an elite group. This identifies the industry’s best advisers while accounting for the firms’ different approaches and varied specializations.

Paladin Registry

Paladin Registry provides comprehensive data on financial advisors’ credentials, ethics, and business practices.

MD Preferred Financial Advisor

Financial advisors that are uniquely qualified to work with medical professionals.

2014 Five-Star Professional

The Five Star award goes to professionals who provide exceptional service to clients.

Investor Watchdog

Investor Watchdog researches and monitors high quality advisors.

wp_footer()