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The Northern Star 06/04/18 Jobs Report Calms Volatility

Message from Jon

I'm out on a stay-cation until Friday the 8th so enjoy the week!


Jobs Report Calms Volatility


Markets experienced heightened volatility this week, with the S&P 500 rising 0.49% and Dow dropping 0.48%. Meanwhile, the NASDAQ rose 1.62%, as international markets took a small dip, with the MSCI EAFE losing 1.10%.[1,2]

The markets' highs and lows came from a variety of economic and geopolitical developments. The U.S. jobs report posted solid gains while international trade concerns continued to cause some unease. In this market update, we'll break down the major stories to help you understand what moved markets.

Impressive Jobs Report
Outstanding nonfarm payroll employment numbers rolled in on Friday, and the data supports a strong U.S. economy. Here is a snapshot of some key numbers:[3]

  • Unemployment dropped to 3.8% - its lowest recording in 18 years. 
  • Payroll growth jumped to 223,000, far beyond the expected 188,000.
  • Average hourly earnings climbed 2.7%; as a result, the Fed will likely raise interest rates two more times in 2018. 

Taken together, the data gives investors and analysts a positive outlook. With more people working, consumption could rise, which could increase demand on production and keep people employed. Some analysts believe that this cycle should continue, barring any unforeseen disruptions. Meanwhile, the solid data helped ease market tensions and keep the U.S. dollar up, despite concerns of a potential global trade war.[4]

New International Tariffs

On Tuesday, President Trump said the U.S. would implement a 25% tax on $50 billion worth of products from China, including high-tech investments. This decision seemed to surprise China, as rumors of a trade war had recently calmed.[5] U.S. and Chinese officials were unable to resolve their dispute over tariffs on Sunday, June 3.[6]

The Trump administration also announced tariffs on metals from Canada, Mexico, and the European Union - all U.S. allies. In an attempt to reduce our trade deficit, Trump placed a 25% tax on steel and a 10% tax on aluminum. International leaders reacted quickly to the news, claiming they may strike back on U.S. goods like orange juice, motorcycles, bourbon, apples, and other products.[7]

What's Ahead?

Next week, we will focus on Tuesday's job openings and Wednesday's international trade reports. Other indicators like jobless claims and factory orders will help balance out a relatively quiet week for economic data.[8] In addition, we will continue to track developments on trade negotiations and the potential summit between President Trump and North Korean leader Kim Jong-un.[9]  

If you have questions about how any of this information may affect you, please contact us. We are happy to help you.

ECONOMIC CALENDARMonday: Factory OrdersTuesday: ISM Non-Manufacturing Index, JOLTS Wednesday: International Trade ReportThursday: Jobless Claims

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

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Tip adapted from IRS.gov[11]
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.  
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
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[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
[2] www.msci.com/end-of-day-data-search
 [3] www.cnbc.com/2018/06/01/the-5-most-important-numbers-from-fridays-jobs-report.html?__source=newsletter%7Ceveningbrief
[4] www.cnbc.com/2018/06/01/the-5-most-important-numbers-from-fridays-jobs-report.html?__source=newsletter%7Ceveningbrief 
[5] money.cnn.com/2018/05/29/news/economy/china-tariffs/index.html

[6]   money.cnn.com/2018/06/04/news/economy/global-trade-war/index.html
[7] www.usatoday.com/story/news/politics/2018/05/31/trump-follows-through-steel-aluminum-tariff-threat-u-s-allies/658835002/

[8] wsj-us.econoday.com/byshoweventarticle.asp?fid=494615&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[9] www.cnn.com/2018/06/01/politics/trump-north-korea-letter/index.html
[10] www.goodhousekeeping.com/food-recipes/dessert/a48194/flourless-fudge-cake-recipe/
[11] www.irs.gov/newsroom/e-news-subscriptions
[12] www.golfdigest.com/story/tom-watson-master-the-downhill-putt
[13] healthfinder.gov/HealthTopics/Category/everyday-healthy-living/safety/stay-healthy-when-you-travel#the-basics_1
[14] www.nuenergy.org/5-ways-achieve-environmental-wellness/
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