Markets “In a Nutshell” for December 5, 2022
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 0.20%, the S&P 500 was up 1.10%, and the NASDAQ rose 2.10%. Foreign stocks (MSCI EAFE) were also up, rising 1.70%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 3.49%. (Data source: Wall Street Journal)
Stocks and bonds were both able to perform well, adding to the gains we saw in October of this year. The Dow Jones is now up over 20% since its lows in October and just 5% away from a new all-time high. While the S&P 500 is still down 15% for the year, it has also seen a nice rally of 14% from the October lows. Bonds have also had a nice rally as yields have come down from their highs. Muni bonds had their best monthly return since 1986 while U.S. taxable investment-grade bonds had their best month since 2008. Although the Fed seems poised to keep increasing rates, the 10-year treasury yield has fallen from over 4.2% down to 3.5% in just the last month. This has been good news for both stocks and bonds as investors are hopeful we have seen yields peak.
Strong Jobs Report
The November jobs report was released last week and from a job growth point of view was strong as 263,000 jobs were added to the US economy. Although these numbers typically mean good news for the market, this is not currently the case. Investors worry that with these strong jobs numbers the Fed may be inclined to continue rate hikes longer to try and tame inflation. Wage growth continued to accelerate by 5.1% up from 4.9% last month another factor that will cause inflation to continue. The Fed is in a tricky spot because although these numbers would show the economy is strong, their main focus is to get inflation under control and by doing so will most likely cause people to lose their jobs. However, we have not seen that yet which may show the Fed they have more work to do on raising rates.
What is the current labor force participation rate? (Scroll Down for Answer)
Have a Great Week!
1) 62.1%. We are still well off the pre-Covid number of 63.4% of Americans working or looking for a job which is one reason wage growth is affecting inflation. The all time high labor force participation rate was 67.3% in January of 2000.