Positive employment data rallied markets back from the cliff last Friday, in what seems to be a reoccurring theme; a reversal in trend mid-week changing sentiment by week’s end. The Albatross seems to be the consistency we had grown accustom to in recent years…

US Jobs

The jobs report carried several points of data that were positive. The overall rate moved down to 5.4%. It has not been at this level since 2008[1]! Not only is it at a 7 year low, it comes in a month where the participation rate ticked up 0.1%. In past months where the unemployment rate has reach renewed lows it often came at the expense of lower participation. This will happen when there is less confidence in the economy, or more commonly in recent years the result of retiring baby boomers… Thanks Mom and Dad!

With higher participation and still a falling unemployment rate the market had much to celebrate on Friday. This was a good week for this to happen as much of the week was marred by concerns over Greek debt, comments from the Federal Reserve Chair that stock valuations seem high, and uncertainty surrounding the UK general election.

Janet Yellen

Federal Reserve chair, Janet Yellen, commented on Wednesday on the state of stock valuations. Comments indicating that stocks are highly priced have given indication to some that the Fed may act sooner than the economy is ready in raising interest rates. The Federal Reserve does not have a mandate that pertains to stock prices. Their actions are based on inflation and employment. Improving employment should (but has yet to) lead to inflation. Full employment and keeping inflation contained (2%) are the primary concerns of the Federal Reserve Board.

International

In a European landscaped that has been driven so hard by the success or failure of Germany, Europe saw success driven by a periphery nation this week. Spain’s unemployment was expected to fall 64.8k, but actually fell 118.9k[2]. The sad part is that their overall unemployment t rate still sits over 20%! China continues to show signs of slowing as trade balances narrowed; imports and exports both fell. PMI data retreated as well. All of which lead to the expectation of additional stimulus from the Peoples Bank of China. The UK election was very close through-out last week not allowing for a clear indication of the UK’s intent to leave the EU.

So with all this activity last week the markets were still able to post modest gains for the week. The one constant every week has been less consistency in gains. Over the last several years we have become very complacent to the consistent positive gains during up swings. The consistency we experienced during up and down swings are likely not to be the norm through-out much of 2015, creating a search for consistency is possibly the albatross of 2015.

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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.

[1] www.mfs.com – week in review

[2] www.investing.com – economic calendar