Markets “In a Nutshell” for February 5, 2019

Investment Week at a Glance

Stocks finished higher for the week. The Dow Jones Industrial Average was up 1.32%, the S&P 500 rose 1.57%, the New York Stock Exchange Composite (2,000 stocks) was up 1.67% and the average investors index (Value Line Index) was up 1.32%. Foreign stocks (DJ Global ex U.S.) were up 1.07%. Bond prices were lower for the week, pushing the yield on the 10-year U.S. Treasury down 6 basis points to finish the week at 2.69%. (Data sources: Barron’s Financial, Wall Street Journal)

100th Straight Month of Employment Gains

Last Friday, the U.S. Labor markets showed continued persistence adding 304,000 jobs in the month of January. Despite the overwhelming news coverage of the government shutdown during the month, businesses continued hiring at an accelerating pace with education, health and construction leading the way in industries with the highest job growth. Wages also continued to climb higher marking their 6th straight month of over 3.0% growth and increasing its difference over inflation. While corporate earnings estimates and consumer sentiment have worsened over recent months, the economic data being reported continues to display relative strength in the U.S. consumer compared to the dismal outlook abroad. (Wall Street Journal)

Fed Rate Hikes to Pause

Last Wednesday, the Federal Reserve and Chairman Jerome Powell signaled that the era of consistent, gradual rate hikes was over and that any future rate decisions would be solely based on economic data. This is a dramatic turn in communication from the Federal Reserve Chairman, who is about to complete his 1st year on the job, and is a telling sign at how accepting he is of market concerns. Just last December, when the Fed raised rates 0.25% to a range of 2.25%-2.50%, Powell described an economy in the U.S. that was displaying persistent strength and could withstand continued rate increases. His post conference statement was clearly not what financial markets were hoping for and contributed to some of the more violent moves in stocks in mid-December.

Future Fed policy will be crucial in determining the outcomes of not only economic, but also financial markets in 2019. The New Year is starting off with ample opportunities for policy makers in government and the Federal Reserve to make crucial mistakes in knocking the economy off a strong run in 2018. So far this year, the Federal Reserve has had to adjust its policy communication to please markets, U.S./China trade negotiations have continued with some good news, and a government shutdown has lasted an entire month and may shutdown again in the coming weeks if a deal isn’t reached. Washington is walking a tightrope this year to say the least and has made it this far with only moderate pain, but how long can they continue dodging crucial mistakes is the question for 2019. (Wall Street Journal)

Quiz:

How many jobs have been gained since the beginning of the jobs recovery 100 months (8 years and 4 months) ago?

a. 5.2 million

b. 11.4 million

c. 18.9 million

d. 26.3 million

Answer is below…

 

Have a good week!

 

Answer to quiz:

c. 18.9 million jobs have been added since the jobs recovery began 100 months ago.