Weekly Talking Points

1. The S&P 500 ended the week up 1.56% as data is finally starting to win over headline fear. The S&P is now up 4.25% YTD, while the Dow lags at 0.82% up for the year. The big gainers continue to be technology and small-caps with their respective indices up 11.99% and 11.02% year-to-date.
2. On Friday another solid jobs report was released. For the month of June the US created 213,000 new jobs (195,000 were expected), but even better than that, including revisions to April/May the total number rose to 250,000.
3. Despite the job gains, the unemployment rate actually rose from 3.8% to 4.0%. This happens when workers return to the workforce. For many years after the financial crisis some “experts” lamented the fact that while the unemployment rate was decreasing the percentage of people participating in the labor force was actually dropping. Some of this was demographics – there are two rather large population bubbles at each end of the age distribution in the US right now – boomers who are retiring, and generation “Z” (or millennials depending on who you talk to) that are in their college years. Neither of these typically work a 40-hour week, for obvious different reasons, yet both count as part of the “available pool of workers”.
4. Both the ISM Manufacturing and Non-Manufacturing numbers came in strong last week, at 60.2 and 59.1 respectively. As a reminder, above 50 is growth and below 50 in contraction.
5. One quick note (and a preview of the quarterly commentary), I believe that the trade issues will be resolved over the summer. I do not see the tariff talk continuing deep into the election cycle – there is simply too much political capital at risk to have a temporary (by the administrations own admission) issue determine the course of such an important election. Of course, weirder things have happened…