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Home>Daily Capital>Investing & Markets>Fiscal Cliff Negotiations Stall; Jobs Report Better than Expected

Fiscal Cliff Negotiations Stall; Jobs Report Better than Expected

Market Digest – Week Ending 12/7

Stocks remained in a narrow band as Fiscal Cliff negotiations again went nowhere. Friday’s jobs report was better than expected, with the headline unemployment number dropping to 7.7%. Apple, America’s favorite stock, fell 8.9% this week as China Mobile announced it will carry Nokia’s new Lumina smartphone and an analyst report predicted share loss in tablets. Gold fell.

Weekly Returns

S&P 500: 1,418 (+0.1%)

MSCI EAFE: (+0.8%)

US 10 Year Treasury Yield: 1.63% (+0.01%)

Gold: $1,704 (-0.6%)

USD/EUR: $1.293 (-0.6%)

Major Events

  • Monday – Republicans countered with their own deficit plan, proposing only half of the tax revenue as Obama.
  • Monday – The ISM factory index showed US manufacturing shrank in November, falling short of expectations.
  • Tuesday – Obama quickly rejected the Republican deficit proposal for not including enough revenue from tax increases on high-income earners.
  • Tuesday – Uniting against Egyptian President Morsi’s recent power grab, protestors in Egypt pushed through cordons and riot police to rally directly outside the Presidential Palace.
  • Wednesday – Contrasting the negative manufacturing report on Monday, the ISM non-manufacturing index showed US services unexpectedly increased in November.
  • Thursday – The European Central Bank reduced its economic growth forecast, with President Mario Draghi not expecting a recovery until the second half of 2013.
  • Friday – US nonfarm payrolls increased ahead of expectations, pushing the unemployment rate to 7.7%.

Our Take

Fiscal Cliff concerns largely overshadowed Friday’s jobs report, but it was an important one. The economy added 146,000 jobs compared to an expectation of around 85,000. Most of the positive surprise came from the private sector, proving Fiscal Cliff concerns are not having an outsized impact on hiring decisions.

Apple’s mostly symbolic announcement that it will manufacture some Macs in the US provides a nice example of how the global economy is always changing. It is a small clue that the US may once again return as the envy of the world.

China’s amazing growth was fuelled by cheap manufacturing labor. Today, China faces higher labor costs and competition from increasingly sophisticated manufacturing machinery. Europe is sinking deeper into recession and has massive structural problems. The US economy is not roaring, but it is growing and appears to have some momentum. An improving housing market, resurgent manufacturing sector, increasing energy production, and technology leadership are all good things for the US looking ahead.

If our elected representatives could look beyond their petty bickering and pass legislation on the portions of the fiscal cliff where they already agree, 2013 could be a very promising year.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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