Domestic stocks only traded for 4 days last week, due to the Independence Day holiday. In that time, all 3 major domestic indexes posted positive results for the week. The S&P 500 added 1.52%, the Dow gained 0.76%, and the NASDAQ increased 2.37%.[1] International stocks in the MSCI EAFE were up as well by 0.56%.[2]
Once again, trade and tariffs were a major topic on many people's minds. On Friday, July 6, the U.S. and China placed $34 billion of duties on each other's imports.[3] However, instead of focusing on the trade-war escalation, another topic captured many investors' attention: the latest jobs report.
What did we learn about the labor market?
This month's report about the employment situation provided several indications that the economy continues to be healthy and growing.
1. The economy added more jobs than expected.
Economists predicted approximately 195,000 new jobs in June. Instead, the report showed that the economy added 213,000 new positions.[4] This positive performance indicates the labor market may be somewhat looser than people originally thought. As a result, the economy may have more ability to continue growing without inflation becoming a bigger concern.[5]
2. More people tried to enter the labor market.
Unemployment rose from 3.8% to 4% in June. On the surface, this result may seem negative. In reality, the increase comes from people who were sitting on the sidelines deciding to look for work once again. This choice indicates they feel more confident in their potential to find jobs.[6]
3. Wage growth continued at a moderate pace.
The latest data revealed wage growth at a 2.7% annual pace, which was slightly below projections. Economists aren't certain why wages are growing at such a tepid rate, considering the labor market's strength.[7] However, with a record number of open jobs, wage growth should increase later this year. In addition, June's pace should help calm concerns about the economy growing too quickly.[8]
One detail that June's employment report didn't show was any meaningful, negative impacts from tariffs. If the trade disputes continue, however, industries such as manufacturing and construction could suffer. For now, the economy is starting the 3rd quarter on relatively strong footing - after a 2nd quarter that experts say could have experienced economic growth as high as 5%.[9]
We will continue to monitor ongoing trade developments for any lasting effects on the economy or our clients' financial lives. As always, if you have any questions, we're here to talk.
ECONOMIC CALENDAR
Tuesday: JOLTS
Thursday: Consumer Price Index,Jobless Claims
Friday: Consumer Sentiment
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P US Investment Grade Corporate Bond Index contains US- and foreign issued investment grade corporate bonds denominated in US dollars. The SPUSCIG launched on April 9, 2013. All information for an index prior to its launch date is back teased, based on the methodology that was in effect on the launch date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back tested returns.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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