Markets & The Economy
This week the markets began with a bang, cleaning up much of August losses. After last week’s comments by Fed Chairman Powell at the Jackson Hole annual meeting, the markets appear to be responding to a speech, that In my opinion, seemed a bit hawkish, as suggested below.
Not exactly a reason to buy. But the recent rally in the broad indexes have taken the markets away from being oversold, and for now we’re invested and I’m content to be neutral. That said, with so much technology, AI and our friendly Algochums, and some pundit narratives, the impact has been void of much economic data. And what data has come out for July, Existing Home Sales fell 2.2%, Durable Goods fell 5.2%, New Home Sales increased 4.4% and Real GDP Growth for the Second Quarter was revised lower to a 2.1% annual rate, presents a softer mix. And today the monthly Unemployment data was released and Total Nonfarm Payroll increased by 187,000 in August, and the Unemployment Rate increased to 3.8 percent. At first glance the payroll rise appears strong, however, previous months were revised down and added to today’s data suggesting a weaker number than presented. And any rise in the unemployment rate will be favorably received by the markets. Also worth noting, Average Hourly Earnings declined, consistent with yesterday’s release of data showing a month over month increase in Continuing Jobless Claims. All of this is good news, suggesting economic growth while softening but, in my opinion, still in a transition that needs more evidence. For now, the markets want to rally on slow growth data and decline on strong growth data. Hence, I’m not surprised by this week’s rally, and we did take advantage of the recent decline.
The future of employment is a focus of both the Fed and our portfolios. AI and robotics are being used by large hybrid (Land and Internet) retailers as warehouses are being automated with robotic movers and conveyor belt personnel. This will likely be the first noticeable impact of many corporate robotic transformations to come.