Markets “In a Nutshell” for September 10, 2019
Investment Week at a Glance
Stocks finished up for the week. The Dow Jones Industrial Average was up 1.49%, the S&P 500 rose 1.79%, the New York Stock Exchange Composite (2,000 stocks) rose 1.54% and the average investors index (Value Line Index) was up 1.97%. Foreign stocks (DJ Global ex U.S.) were up 2.08%. Bond prices were down for the week, pushing the yield on the 10-year U.S. Treasury up 5 basis points to end the week at 1.55%. (Data source: Wall Street Journal)
Stocks Rally But Dim Outlook Remains
Stocks rallied during the shortened trading week with positive headlines around trade contributing to a sizeable move higher in stocks. All-time highs in stock indexes remain just about 2% away from current levels, but bond yields are priced in lower than they were during the 2008-09 Recession, signaling a heightened worry of another recession. While these two points aren’t necessarily contradicting each other, there is some tension between stocks and bonds in terms of what the outlook in the short and long term is. Stocks being this close to new highs signal that the short term isn’t as bad as thought late last year, but bonds prices are saying that the longer term outlook looks dim at best. Periods like these can last a surprisingly long time, like the tech bubble in the early 2000’s, but at some point in the future a reconciliation is likely to occur between stocks and bonds. (Barron’s)
Jobs Report Slightly Misses Expectations
The U.S. added 130,000 jobs in the month of August, slightly missing the expectation of 156,000 and down from the average of 190,000 since employment gains started 8 years ago. The pace of job growth has slowed almost right in line with the slowing of the economy. Both the labor market and the economy are slowing down back to more sustainable rates, but reflect a possible risk of a recession if growth doesn’t stabilize in the next couple of quarters. The more intricate details of the report did present some good news, including prime age workers (25-54 years old) participation rate increasing, which shows younger workers are still optimistic about their job opportunities. Wage increases continue to remain above the 3% mark, a bright spot for employees who continue to see pay increases faster than inflation. A key U.S. manufacturing index did dip into contraction territory last week and may be a precursor to some issues for the labor market in the coming months. (Wall Street Journal)
Since the beginning of summer, what has been the return on the S&P 500?
Answer is below…
Have a good week!