Huge Employment Report and Video Follow Up

This morning we learned that the November employment report was tremendous! U.S. companies added over 260,000 jobs, which far exceeded expectations. This pushed the employment rate back down to 3.5% matching the low from earlier this year, which is the lowest since 1969.

There were some concerns about the potential for this report because the ADP employment report from Wednesday was so poor. That ADP report indicated private sector job growth of just 67,000 compared to the 157,000 expected.

The large discrepancy between the BLS report we received this morning and the ADP report from a couple days ago is very strange. Perhaps the truth lies somewhere between the two, but for now, the market appears to be taking the government BLS report at face value as the S&P 500 is up over 1.0% on the day at the moment.

The employment-population ratio held steady at 61%. Construction job growth slowed to just 1,000. Speaking of construction jobs….

Over the last couple weeks I provided you with two videos. There have been a couple developments since I released those. Continue reading “Huge Employment Report and Video Follow Up”

The Fed Cuts Rates for a Third Time…And Zombies

Yesterday, the Federal Reserve confirmed the market’s expectations and announced they would be cutting rates for a third time this year. The rate cut is an addition to the recently-announced program of supplying $120 BILLION in liquidity each night AND announcing the resumption of QE whereby they’ll be buying $60 BILLION of short-term Treasurys each month.

In other words, the Fed is pursuing policy that, until the recent Great Financial Crisis, was unprecedented. Why? Why are they pursuing emergency policy actions when the economy is supposedly strong, stock market is near all-time highs, unemployment near all-time lows and inflation supposedly around 2%? Continue reading “The Fed Cuts Rates for a Third Time…And Zombies”

Final Shoe Drops

Back in February, I summarized a few potential recession signals. In that commentary I also stated;

“However, I’ll start to get really concerned when this ISM Purchasing Manager’s Index drops below 50, which would round out a trifecta of recessionary signals.”

Today, it was announced that the ISM Manufacturing PMI has contracted with a reading at 49.1 (below 50 indicates contraction). Continue reading “Final Shoe Drops”

Painkillers Are Not Cures

Last week the Federal Reserve announced it would cut interest rates by 0.25%. This is major news because it signals the end of the “tightening” cycle and is the first rate cut since the Great Recession fallout. I wrote about the stock market’s action during rate cutting cycles a few weeks back here.

Here’s another great chart showing market performance during the last two rate cutting cycles.

Continue reading “Painkillers Are Not Cures”

Fed Rate Cuts and the Market’s Response. A Historical Perspective…

I was asked a great question by a client this morning. “With all this news of rate cuts from the Fed, how does this impact my portfolio?”

The market has broadly rallied on expectations that the Federal Reserve would begin lowering interest rates again…likely even at its next meeting (July 30-31). This is an action the Fed hasn’t taken since the Great Financial Crisis of 2007 – 2009.

But how has the market actually performed, historically, once the Fed has begun easing after a period of tightening? It’s not necessarily bullish at all: Continue reading “Fed Rate Cuts and the Market’s Response. A Historical Perspective…”