Markets advanced last week as volatility was muted while geo-political concerns and a negative jobs creation report did not stand a chance… Here is why.
The Bad
Geo-political tensions seemed to enhance this past week (not just relations between the US and North Korea, but also relations in the E.U.) as Catalonia is attempting to become independent of Spain. Catalonia produces about 20% of GDP for Spain and does not receive its full representation in tax flows back to its territory.
The jobs report was a mixed bag of data. The negative take away was that rather than adding jobs in September, the economy saw jobs fall by 33K for the first time in nearly 7 years.
The Good
Unemployment actually had three positive aspects. First, the under-employment figure fell from 8.6% to 8.3%. Second, the overall rate fell to 4.2% from 4.4%. Third, wage growth increased to 2.9% year over year.
Factory orders expanded in August–A good signal of consumption demands moving into the 4th quarter.
Manufacturing also expanded at the highest rate since 2010 (60.8)–A great signal of economic acceleration. This should lend itself to strong corporate earnings in the first part of 2018.
Conclusion
There was much for the markets to be happy about last week with regards to hard economic data moving into Q3 earnings season. Hurricanes, however, have skewed many of the numbers just discussed. The subtraction of jobs, the falling unemployment rate, wage increases, and manufacturing increases all remain subject to skepticism at this point.
For more information:
If you would like to receive this weekly article and other timely information follow us, here.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.