Weekly Investment & Economic Talking Points
- A lot of data points to go through for last week but we’ll start with the most important one, nonfarm payrolls. The unemployment rate dropped to 4.1%, as the hurricane lull from September subsided. Nonfarm payrolls increased 261,000 in October which was actually a slight disappointment as a larger rebound was expected.
- Despite the “disappointment” in the rebound number this is a great example of how these numbers are subject to revision. The August and September numbers were revised up by 90,000 total, and Septembers negative number has now been revised to a positive 18,000.
- The ISM Non-Manufacturing Index rose to 60.1 in October, well above consensus estimates of 58.5 (numbers above 50 signal expansion, and below 50 contraction). This is a solid measure of the health of the services sector – in fact, 16 of the 18 industries that report into this index reported growth.
- Lots of “news” about the potential for tax cuts, and I am sure there will be more before a final version is passed. This is what we know today: 1) There will be no change the 401k contribution limits 2) Most of the tax “cuts” involve cuts to pass through income, especially for manufacturing types of industries 3) High income earners (non-pass through income) won’t receive as much of a break as some pundits were saying 4) It does not appear that there will be a capital gains tax cut.
We are continuing to see positive (if not great) economic numbers, along with really, really solid earnings numbers. Investors should enjoy this ride while it lasts. We have now had 12 consecutive months of positive market (S&P 500) returns – this is the first time this has ever happened (through 90 years of available data).