Market News – Week of January 8th, 2018

SLOWER MONTH FOR NEW JOBS ENDS A SOLID EMPLOYMENT YEAR:

In December, the U.S. economy added 148,000 new jobs. Employers added jobs in manufacturing, construction and health care, but not retail. December was the 87th straight month in which the economy has added jobs, the longest such stretch ever. For the year, the economy added 2.1 million jobs, the seventh straight year of more than two million jobs being added. The unemployment rate remained the same, at 4.1% (a 17-year low). The unemployment rate was 4.7% one year ago. The Labor Force Participation Rate stayed the same at 62.7%. This current labor-market expansion is exceptional for its length but not for its strength. The expansions of the 1960s, 1980s and 1990s saw payroll growth that grew by better than 2.5% annually. In the current, very long, expansion, payroll growth has topped 2% only once in 2014.

INTEREST RATE INCREASE IN JANUARY…MARCH?:

The employment report for December was less than expected and a bit less than we have been experiencing recently. This may cause the Fed to pause its interest rate hiking in its January meeting and defer the next hike to March. The Fed wants multiple interest rate hikes this year (three or four).

BEGINNING WHERE IT LEFT OFF:

The major stock indices ended a strong year in 2017, and began the year right where 2017 left off, strong out of the gait. The S&P 500 posted four new record highs on four days of trading last week rising over 2.5%, its best start to a year since 2006. Technology stocks in that index rose over 4%. Low interest rates, low inflation, strong corporate earnings, and accelerating global growth drove 2017 stock prices, and that environment continues to drive prices as the new year begins.

CALM MARKETS:

As you can see above, 2017 was a strong year for the markets. A remarkable facet to 2017’s returns was how little drama there was in getting to those year-end numbers. The largest decline during the year was about 3%. Over the last 37 years, the average inter-year decline in the market is over 14%. We are always telling clients to be prepared for these types of abrupt declines, but in 2017 it did not happen.

References:

SLOWER MONTH FOR NEW JOBS ENDS A SOLID EMPLOYMENT YEAR: http://www.calculatedriskblog.com/2018/01/december-employment-report-148000-jobs.html; https://www.wsj.com/articles/u-s-employers-slow-pace-of-hiring-in-december-1515159117
BEGINNING WHERE IT LEFT OFF: https://www.wsj.com/articles/global-stock-gains-show-some-signs-of-slowing-1515118525
CALM MARKETS: J.P. Morgan Weekly Market Recap