Markets “In A Nutshell” for August 8, 2022

Markets “In a Nutshell” for August 8, 2022

Investment Week at a Glance

Stocks finished mixed for the week.  The Dow Jones Industrial Average fell 0.10%, the S&P 500 was up 0.40%, and the NASDAQ rose 2.20%. Foreign stocks (MSCI EAFE) were also up, rising 0.20%.  Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 2.84%.  (Data source: Wall Street Journal)

Job Market Continues to Heat Up

The new jobs report was released last week, and we saw an increase of 528,000 jobs in the month of July. This number is more than double what expectations were. This is a good sign for the economy as low unemployment is typically good for the economy. Although there are positives to this number, this will not give the Fed a reason to stop interest rate hikes as they still see no slowdown in the economy as they try to get inflation under control. Another negative from this report was the labor-force participation rate declining which shows signs of a tighter labor market, creating the need for higher wages and pushing inflation higher. There is not another Fed meeting until September 20th so the Fed may not have to react to this set of data if we see slowing signs of inflation before the end of September. If we still are seeing strong inflation data, the Fed will need to raise rates once again which causes worry for the market.

Recession or Not?

Now that we have seen 2 consecutive quarters of negative GDP growth meeting the technical definition of a recession, there has been much debate if we are truly in a recession. Typically, we do not see this type of job growth and unemployment in a recession, so we are in somewhat uncharted territory. From a market standpoint, whether this becomes officially labeled a recession or not does not really matter as the market is continuously pricing in all sorts of data. This is why some say there is a disconnect between the economy and the stock market because the stock market tends to react before the economy and is able to predict these downturns in the economy. The market also pays more attention to companies’ earnings than the other noise as that is what truly dictates the value of a company.

Quiz:

Quiz

What is the new unemployment number after a strong July jobs report? (Scroll Down for Answer)

1.    3.5%
2.    3.8%
3.    4.2%
4.    4.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

Answer:

1)      3.5%, the unemployment number is back to where we were pre-pandemic which was the lowest unemployment since 1969. The economy, although has had its struggles, has been able to bring back many of the jobs lost due to Covid and is a far ways away from the 14.8% unemployment we saw in April of 2020.