SOLID JANUARY EMPLOYMENT REPORT:
The U.S. economy added 200,000 jobs in January. The unemployment rate stayed the same at 4.1%. The Labor Force Participation Rate remained unchanged at 62.7% (been in the same range for a couple of years). We have now experienced 88 consecutive months of job growth, the longest such streak (by far) in U.S. recorded history.
PEOPLE FINALLY STARTING TO EARN MORE MONEY:
The U.S. Labor Department reported on Friday that average hourly earnings for private sector jobs rose 2.9% in January from a year earlier. That is the largest year-over-year increase since 2009. Businesses have been reporting for months that the labor market is getting tight. That tightness now seems to be resulting in higher pay.
Market reactions are not always intuitive. A strong labor report is good for overall economic growth, right? Well, yes, but you can’t have too much of a good thing in the investment markets. If the labor market is too strong, then wages pick up, and then that nasty, bull market-ending thing could happen: inflation. On Friday, the labor report showed that wages are beginning to rise, finally. On top of that, fear of interest rates rising stoked concerns even further. Investors in U.S. government bonds were selling Friday, and this causes the yield on U.S. Treasuries to rise, which effects interest rates in general. Investors, thus, had the double fear of inflation and higher borrowing costs for consumers and businesses, and the negative momentum was underway. On Friday, the markets tumbled over 2% in the U.S.
COMPARED TO LAST YEAR:
This time last year, the S&P 500 was up 2.62%. This year it is up 3.31%. Regardless of where this year ends up, it is highly likely that this year will have more volatility than last year.
ENDS OF BULL MARKETS:
Since the 1930s, there have been twelve bull markets that have ended. On average, during the last two years of these bull markets, stocks grew in value by 58%. During the last twelve months of these bull markets, stocks grew by 25% on average. During the last six months, the average growth was 16%. If you try to time when to get out of the market, it can cost you a lot. Have a plan and stick to the plan.
He is a smart guy…look him up in Wikipedia if you don’t believe me. Of our current market, he says the following:
“I recognize that this is one of the highest-priced markets in U.S. history. On the other hand, as a historian of great equity bubbles, I also recognize that we are currently showing signs of entering the blow-off or melt-up phase of this very long bull market.” (Jeremy Grantham January 2018)
USE YOUR MONEY TO MAKE A LIFE:
According to a recent survey by Merrill Lynch, 85% of people that work with a financial professional said they had not had a conversation with their advisor about their “hopes and dreams” for retirement. Don’t deflect if your advisor (especially if it’s me!) asks you “what” and “why” questions. The “how” questions are my industry’s bread and butter, and tend to be much more comfortable. But make sure your advisor knows why you want to retire and what your dreams are when you get there, not just the date and the amount of money you want to have when you get there.
“You can use your life to make money. OR You can use your money to make a life.” Chad Hamilton (from the book Deep Wealth).
PERSPECTIVE: Deep Wealth, Chad Hamilton, 2015, at pp. 4-5.
SOLD JANUARY EMPLOYMENT REPORT: http://www.calculatedriskblog.com/2018/02/january-employment-report-200000-jobs.html
PEOPLE FINALLY STARTING TO EARN MORE MONEY: https://www.wsj.com/articles/u-s-gained-200-000-jobs-in-january-as-wages-picked-up-1517578320
ENDS OF BULL MARKETS: Eventide Funds January 2018 CIO Update