Wednesday, September 4, 2019

Monthly Market Insights: Sept 2019 | Lessons for Labor Day

Spencer Joyce, CFA
Author position
Vice President | Markets Analyst

American Resiliency & Results

Here in the United States, we love to work. Our country was founded by colonial upstarts, and their spirit of independence and self-determination still courses through America’s veins. Our economy has grown and evolved over time, but we still approach our daily routine with the same freneticism of our ancestors.

That being said, we like a good celebration as well. From milestone birthdays, to retirements and graduations, to ‘the holidays’ that stretch from Thanksgiving to New Year’s. In the right context, Americans like to have a good time.

Merging these, Labor Day was perhaps an inevitability. The spirit of the holiday has likely evolved a bit from its origins in the fight for workers’ rights in the late 1800s; however, we believe this country deserves its Labor Day. The American consumer, and by extension the American worker, represents the most meaningful segment of the world’s largest economy.

Despite plenty of geopolitical turmoil this year, the US consumer and our labor markets have been strong. In fact, resiliency on this front has been the cornerstone of our sanguine view toward the US economy. To celebrate Labor Day this year, we offer points of interest relating to labor and the consumer:

  1. Unemployment is at its lowest since 1969. Holding at 3.6% - 3.7% since April, the US unemployment rate is very low by historical standards. This figure applies to folks that would like a job and are looking for one, but are not currently working.
  2. Wages have grown at 3%+ for 12 straight months. Worker pay is growing faster than inflation, and is increasing at its best rate since the Great Recession. We view a range of 3% to 4% as a ‘sweet spot’ for this metric, where pay is noticeably higher, but the cost is manageable for employers.
  3. Our economy has added jobs in 106 consecutive months. Since emerging from the housing crisis malaise, the US economy has gained jobs every single month. Growth in health care and service industries has been steady; recent years have seen some additions in manufacturing.
  4. The US Economy has added 1.2 million jobs YTD. With data available through July, this averages to about 165,000 new jobs per month. Watch for August numbers on Sept. 6!

We hope you enjoyed this Labor Day. Collectively we work, spend and invest as much as ever. This virtuous cycle provides our prosperity, but every once in a while (at least once per year!) it’s worthwhile to celebrate our labors.

– Spencer E Joyce, VP, CFA

Name to Know for September

Peter T. Gaynor

Federal Emergency Management Agency, Acting Administrator

Mr. Gaynor was confirmed by the US Senate as the Deputy Administrator of FEMA in October 2018. He has been the acting head of the disaster response agency since Brock Long resigned earlier this year. A permanent replacement nomination is currently stalled in Congress. FEMA falls under the Department of Homeland Security.

Mr. Gaynor is of note this month as Hurricane Dorian makes its way toward the Atlantic Coast. Where the storm will impact the US is unclear, but it should demand a response from FEMA as it is already the strongest hurricane to ever hit the Bahamas.

Markets Rundown

US Equities: The S&P 500 returned -1.58% in August, its first down month since May. Through 8/30, YTD S&P 500 total return has been 18.3%.

Global Equities: Developed and emerging markets declined in August, falling 2.6% and 4.9%, respectively.

Federal Reserve: The Fed is expected to cut interest rates by 25 basis points (0.25%) on Sept. 18.

US Treasuries: Treasuries rallied last month. The yield on 2-yr and 10-yr notes ended August at 1.5%, and the 2/10 curve inverted for the first time this cycle during the month.

US Credit: Investment Grade and High Yield corporate bonds yield an average of 1.34% and 3.94% over Treasuries, respectively. Spreads are above their tightest levels of the summer, but remain fairly stable.

Markets Rundown Source: Bloomberg

Important Disclosures

Each client’s investment needs, risk tolerance, and goals are different. This newsletter is not meant to be advice for any specific investor. Nothing in it should be construed as an offer to sell, or a solicitation of an offer to buy, any securities. This should not be used as the sole basis for an investment decision. Any opinions or estimates are subject to change without notice. For information about how any of this information applies to your per­sonal financial situation, please contact your Wealth Advisor.

Past performance is not a guarantee of future results.

Although the information provided to you in this newsletter was obtained or compiled from sources that we believe are reliable, J.J.B. Hilliard, W.L. Lyons, LLC, A Baird Company, cannot, and does not, guarantee that the information or data is accurate, timely, valid, or complete.

All investing involves risk, including the possible loss of principal. You should carefully consider investment objectives, risks, charges, and expenses of any investment before investing. Diversi­fication and asset alloca­tion do not guarantee a profit or guarantee against a loss. Note: It is not possible to invest directly in an index. 

Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market or economic developments. The bond market is also volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect can be more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks.