Overview: Global stocks continued to move higher last week, as a strong jobs report and continued earnings beats overcame inflation fears and supply chain concerns. In the U.S., the S&P 500 index now has reached 64 new highs for the year. The benchmark index finished the past week up 2.0% in total return on the back of strong earnings, positive labor market data, and the expected tapering announcement from the Federal Reserve. The Federal Open Market Committee voted unanimously at their scheduled meeting last week to start tapering the asset purchase program at a pace of $15 billion per month. At that pace, tapering will be finished by mid-2022 and the Fed will continue to provide guidance around when rate hikes might begin, with the expectation that the Fed will consider one or two 0.25% hikes by the end of next year. In the bond markets, interest rates fell, with the 2-Year and 10-Year Treasury yields ending at 0.40% and 1.45%, respectively.
Employment Situation: (from JP Morgan) The economy saw a return to a faster pace of hiring in October, with the addition of 531,000 non-farm jobs and a fall in the unemployment rate to 4.6%. In response to tight labor availability, wages continued to climb with average hourly earnings up 4.9% from a year ago. Job growth was widespread across sectors, predominately led by strong hiring in the important leisure and hospitality sector. We also saw signs of faster hiring in sectors worst-hit from supply chain disruptions, such as the construction, manufacturing and transportation sectors. While these sectors remain below pre-pandemic employment levels, hiring has steadily increased this year as pandemic effects recede and higher wages lure more people to the workforce. These additional workers should help supply chain bottlenecks to ease somewhat as we approach the holiday season, in turn reducing some of the transitory drivers of inflation. However, as these short-term drivers begin to ease, more sustainable ones are picking up, and the broader increase in wages in recent employment reports should continue to bolster inflation in a post-pandemic environment. For the Federal Reserve, this report serves as another confirmation of both a steady labor market recovery and persistent inflation pressures.
Weekly Returns and Data
Sources: JP Morgan Asset Management, Goldman Sachs Asset Management, Barron’s
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