10/4/19 – October Starts on a Volatile Note

The Dow declined over 1,200 points from Tuesday morning through Thursday morning, before rebounding and recouping almost 800 points of the loss. For the week the Dow declined 0.9% while the S&P 500 decreased 0.3%. Recession fears drove the sell-off early in the week. The September jobs report came in below the consensus estimate this morning with the economy adding 136k net new jobs. The unemployment rate declined to a 50-yr low of 3.5%. Analysts had been looking for 145k new jobs. I think the strength we saw today was partially the report not being worse and partially what it means for the Fed. While the consensus was 145k, many people were thinking this could be a really bad month. 136k isn’t great relative to the last 4-5 years, but it’s still enough to meet/exceed population growth. The report also has some investors thinking this helps ensure the Fed cuts rates again this year, either this month or in December. I’ve long argued we don’t need to be cutting rates, but many market participants want cheaper money and the Fed seems willing to deliver. Read More

We’ve talked about the trade war for coming up on two years now and it seems clear that it is impacting corporate growth and earnings in a negative manner. While we’ve had a good year for the stock market, it’s largely just recovered what we lost in 2018. Since the beginning of 2018, the Dow is up a mere 1.5%. Earnings growth is essentially flat this year as well. Basically, we’ve moved sideways on the market, albeit a very volatile sideways, since the talk/implementation of tariffs started in late 2017/early 2018. Economic and market growth have been centerpieces of the Trump administration’s marketing plan, but some of that has stalled since the trade war began. It will be interesting to see if a further slowing, and potentially negative growth will spur a quick trade deal with China.

Oil decreased 5.7% this week to close at $52.98/barrel. The yield on the 10-yr Treasury moved lower, closing at 1.53%, from 1.68% last week. The average rate on a 30-yr fixed rate mortgage moved higher to 3.65% from 3.64% last week.     

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