Some selling crept in this week as the lackluster jobs data reported last Friday continues to trickle into the markets and is digested. The DOW is hovering just above it’s 50 Day Moving Average which usually acts as a floor of support for the market to bounce up from. This level has held a number of times recently.
Market moving data continues to be dominated by jobs data, the Delta variant, future variants and the Federal Reserve’s bond purchase taper plans. Verbiage from the Federal Reserve’s Beige Book report highlighted that the U.S. economy has “downshifted slightly” in August as a result of the Delta variant surge (think: dining, travel, & tourism diminishing a bit). Airlines in particular are revising future earnings predictions down a bit. Additionally, it was reported that inflation is “steady at an elevated pace” and with the current supply and demand imbalance, across multiple industries, upward pricing pressures continue to be seen (this is inflation). We’re also seeing news out of Europe and their European Central Bank’s plans to begin unstimulating which is creating volatility in their markets.
According to Bloomberg, many investors have begun to see relative U.S. stock valuations as excessive, even as growth in the rest of the world suffers from renewed lockdowns and travel curbs. As inflation accelerates due to supply shocks, eventual tapering of central-bank stimulus may not be well received which could explain a little of the selling this week.
An interesting tidbit earlier this week from Treasury Secretary Janet Yellen. She pointed out, in her opinion, that not increasing the national debt limit would have “irreparable damage to the U.S. economy and global markets” - citing they have until sometime in mid-October to prevent what would be a historic default. Likely they will increase the debt ceiling and avoid default, just like they’ve done every time before, but it will make waves in the media.
The July job openings reported a fifth consecutive monthly record number of openings with 10.934 Million new jobs created, this is up 749K from the June report and almost 1 million jobs more than consensus estimates of 9.950 Million. Further, better than expected weekly jobless claims helped counter some sour thoughts from market participants. Both these datapoints are a good sign that the labor market continues to heal.
It feels like it’s hurry up and wait right now. As Wealth Managers, we’re focusing on being patient right now as the market grapples with lot’s of information, some of it is opposing or counter intuitive.
Attached is Michael Gibb’s weekly piece.
MichaelGibbsWeekly9.9.2021.pdf
Have a great weekend!
Sincerely, DeHaven, Michael, Janet, Mariah and Tamara.