October 8, 2023
Volume 10, Issue 41
The major domestic equity indexes closed mixed last week after more top-heavy trading in which large-cap growth stocks – the mega-cap information technology and internet stocks, in particular – widely outpaced the rest of the market. Reflecting the underperformance of most stocks, an equally weighted version of the S&P 500 lagged its market-weighted counterpart by the largest margin since March. In related news, large-cap growth stocks outperformed their value counterparts (according to Russell indexes) and the large-cap S&P 500 outperformed the small-cap Russell 2000 by the widest margins over the same period.
On Friday, the Labor Department reported that employers added 336,000 nonfarm jobs in September, roughly double consensus estimates. The details in the report offered a more nuanced picture, however, which appeared to foster a market rebound. Average hourly earnings rose 0.2 percent for the month, bringing down the year-over-year gain to 4.2 percent, its lowest level since June 2021. The workforce participation rate also stayed steady at 62.8 percent, its best level since the eve of the pandemic lockdowns in February 2020. Taken together, the data suggested that increasing supply instead of rampant demand for workers was driving the labor market, making for a more benign inflationary environment.
Other muted economic signals during the week also seemed to calm fears about a rebound in growth and inflation. While a gauge of activity in the manufacturing sector picked up a bit in September and indicated that factory activity was contracting only slightly, its counterpart in the much larger and healthier services sector indicated that growth had slowed considerably since August. On Wednesday, payrolls processor ADP also offered a much different picture of the job market, with its tally of private sector payrolls only expanding by 89,000 in September, the smallest increase since January 2021.
Yields on the benchmark 10-year U.S. Treasury note continued to march upward, spiking to another 16-year high of around 4.89 percent in early trading Friday but fell back somewhat as equities rallied later in the morning.
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks.
Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In The News
Nonfarm payrolls rose by 336,000 in September, the biggest gain since January, and the unemployment rate held steady at 3.8 percent. Both numbers are historically strong, underscoring the resilience of the economy after the Federal Reserve raised interest rates to a 22-year high to try to slow the economy and tamp down consumer prices. More good news under the hood: Job gains were widespread across industries, the labor force is growing and wage gains are cooling – all factors that could help the Fed engineer a soft landing for the economy.
The number of Americans filing first-time claims for unemployment benefits held near historic lows last month, countering concern that the United Auto Workers strike and other risks to the economy would lead to a wave of layoffs. Initial jobless claims stayed nearly steady at 207,000 last week, the Labor Department announced Thursday.
Americans aren’t quitting their jobs in record numbers anymore. Why that’s happening could say somethingabout where the economy is headed.
Rising interest rates mean deficits finally matter.
The average rate on a 30-year fixed mortgage surpassed 7.5 percent on Wednesday, the highest such figure since December 2000. The number of mortgage applications also sank to the lowest levels since 1995, as the mortgage application volume fell nearly 3 percent last week, compared to the previous week.
The Labor Department reported Tuesday that job openings jumped from 8.9 million in July to 9.6 million in August, reversing three straight months of declining numbers in a sign the labor market still remains tight in the face of the Federal Reserve’s efforts to cool hiring. The quits rate – the percentage of workers who quit their job during the month – stayed at 2.3 percent, and the number of layoffs and discharges held steady at 1.7 million.
Inflation has fallen sharply in the past year. The economy remains strong. Yet Americans remain deeply unhappy about the economy, often citing inflation.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; most can be overcome here.
The Madison Investment Quarterly magazine was published Wednesday. It is available here.
- How Sequence of Inflation Risk Impacts Retirees (Michael Kitces)
- 10 Quotes That Shaped My Investment Philosophy (Barry Ritholtz)
- Is the U.S. Stock Market as Bad as it Seems? (Nick Maggiulli)
This is the best thing I saw this week. The sweetest. The most important. Also really important. Life in Iran. Common sense on “book banning.” Signage. Don’t be fooled. Octobear. Baseball and AI. Sunken treasure … in New York City? School of Rock is 20.
Sixty percent of today’s workers are employed in occupations that didn’t exist in 1940.
“When people are free to do as they please, they usually imitate each other.”
~ Eric Hoffer
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor.
This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.