CORONAVIRUS BRINGS A VERY STRONG WEEK TO A HALT: U.S. stocks enjoyed a four day winning streak until Friday when Coronavirus fears came back into focus and ended it. The virus is beginning to impact China’s economy, and that has markets worried. Estimates for China’s GDP growth are now being lowered. Up until Friday, continued strong economic and earnings data and China’s announcement to halve tarrif’s on many U.S. products pushed stocks higher. Despite the abrupt ending, U.S. stocks posted their biggest weekly gains in months.
STRONG JANUARY JOBS REPORT: The January labor report surprised to the upside with 225,000 new jobs being added to the economy. The Labor Force Participation Rate increased again to 63.4%. Because more people got into the job market, the unemployment rate increased to 3.6%. Wages are 3.1% higher than a year ago, which was a bit below expectations, but still an increase from December.
EARNINGS RECESSION ENDING?: The stock market has continued to rise and the economy has not gone into recession. However, we have been in what is called an earnings recession. As you know, each quarter, the S&P 500 companies all submit their earnings reports. For three quarters (the first three quarters of 2019) these earnings were decreasing, i.e., negative growth. It takes two straight quarterly declines to qualify as an earnings recession. So far, and we are not done yet, it is looking like we might have a slight gain in the fourth quarter of 2019, thus ending the earnings recession. Obviously, if we don’t want an economic recession, corporate earnings can’t keep moving in a negative direction, and so we welcome this news.
THE SANDWICH: AARP recently performed a survey of adults between the ages of 40 and 64. 54% said they provided $1,000 or more to a living parent and 20% said the number was more than $5,000. Of this same age group, 56% gave at least one adult child $1,000 or more, and 25% gave more than $5,000.