The Northern Star 5/07/18 Examining Employment
Message from Jon
I thought it might be interesting to take a view of some market measurements at the moment and historically to give you some context.
Market Measurements: (As of Tue 8 of May)
- Shiller P/E Ratio of S&P 500: 31.70 vs Mean of 16.85
- S&P 500 earnings per share: $110.98 vs Mean of $29.76
- S&P 500 Historical Price: 2,667.41 vs Mean of 259.73
- S&P 500 Dividend Yield: 1.87% vs Mean of 4.36%
- S&P 500 on Jan 1 2008: 1,447.16
- S&P 500 on Jan 2 2018: 2,713.06
- S&P 500 Good to Bad (10/1/2007 - 03/09/2009): -56.27
- S&P 500 Annual Avg 10 yr ROR (assume no dividends): 8.75%
Market Condition Update:
We are still seeing a continued weakening from a technical stand point in the various indicators and market data we observe and follow. The best approach in our opinion is one of caution at the moment.
Till we speak again, enjoy your weekend!
WEEKLY UPDATE - MAY 7, 2018
Domestic indexes posted strong results on Friday, May 4, as the latest labor report data lessened investors' concerns about inflation and interest rates. Nonetheless, stocks had mixed results last week. The S&P 500 dropped 0.24% and the Dow gave back 0.20%, which marked both indexes' 2nd week of losses in a row. Thanks to a bounce in tech stocks, however, the NASDAQ gained 1.26%.International stocks in the MSCI EAFE decreased by 0.57%.
Amid this relatively tepid performance, we reached a big milestone on May 1: Our current economic expansion is now officially the 2nd longest on record. For 8 years and 10 months, the economy has been growing, and many sectors still have room to advance.
As we look to better understand where we stand today, Friday's employment report provides key insights into our economic health.
What We Learned About Employment
1. Growth SlowedThe report indicated that the economy added fewer jobs than expected in April, and average hourly wage growth also grew more slowly than forecast. Federal Reserve members watch this data closely to help anticipate changes in inflation.
2. Participation DroppedThe percentage of working-age people participating in the labor force dropped by 0.1%. This decline may result from people retiring or returning to school but can also come from people choosing to stop looking for work. The lower participation rate may contradict some of the more positive trends we've seen recently.
3. Unemployment DeclinedDespite missing growth projections, unemployment fell to 3.9%, the lowest point in 18 years. The rate has only dropped below 4% during 3 other periods. The low unemployment numbers came more from the lower labor force participation rate than from more people finding jobs.
Key TakeawayLower participation rates could affect long-term economic growth. However, the combination of low unemployment and reasonable wage growth are likely a positive scenario for the economy. Many people who want jobs have them, but inflation should remain under control.
As the bull market lumbers toward its 9th year, many reports continue to indicate a solid economy. If the economic expansion continues through July 2019, it would be the longest in history (with records going back to the 1850s). While that accomplishment would be noteworthy, our focus remains on current circumstances, and striving to find insight that affects your financial future. From trade to jobs to manufacturing and beyond, we have many details to watch on your behalf.
Thursday: Consumer Price Index, Jobless Claims
Friday: Consumer Sentiment
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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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.
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