Market Digest – Week Ending 7/3
Joe DiMaggio’s famous hit streak lasted 56 games. The S&P 500 has now gone 54 days without registering a move of more than one percent in either direction. Equally impressive, exactly two-thirds of those 54 days have been positive. This week was no exception as the S&P 500 gained on 3 of 4 days and finished up 1.2%. About half of the gains came on Friday, fueled by an extremely positive June jobs report. The US economy shattered expectations by adding 288,000 jobs. Official unemployment dropped to 6.1%. Bonds lost value as investors speculated the employment numbers will encourage the Fed to raise interest rates.
S&P 500: 1,985 (+1.2%)
FTSE All-World ex-US: (+1.6%)
US 10 Year Treasury Yield: 2.64% (+0.11%)
Gold: $1,320 (+0.3%)
USD/EUR: $1.361 (-0.3%)
- Tuesday – Following the end of a 10 day cease-fire, Ukraine began a major offensive to remove separatists and reclaim its eastern border. The move risks provoking Russia into fresh military intervention or the possibility of humanitarian problems.
- Tuesday – JP Morgan CEO Jamie Dimon announced he has throat cancer, but that he expects to remain Chairman and CEO of the bank.
- Wednesday – Fed Chairwoman Janet Yellen made comments suggesting she does not see a need to raise interest rates soon. “I do not presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns,” she said.
- Thursday – U.S. employers added 288,000 jobs in June, well ahead of expectations. Unemployment dropped to 6.1%.
- Thursday – The Dow Jones Industrial Average closed above 17,000 for the first time.
- Thursday – ECB President Mario Draghi said its members are open to the use of “quantitative easing” bond purchases if it appears inflation will remain lower than targeted.
With Friday’s jobs report, and with the S&P 500 closing the week at an all-time high, those who bet against the US economic recovery following the sub-prime crisis have been proven wrong. Unemployment is now 6.1%, which is below the average for the last 30 years of 6.5%.
None of this means things will necessarily get better from here, it simply means that capitalism is functioning as intended despite lower than average GDP growth. From an investment perspective, it is better to own stocks when unemployment is peaking and sentiment is dour. That opportunity has passed. But the time to be frightened should only be when euphoria and greed dominate. We don’t see that either. It is late in a bull market, but that doesn’t mean it can’t last years longer. Volatility is abnormally low. The market is rising. Now is not the time to get greedy, but there is no reason not to enjoy the moment.
And enjoy the holiday weekend. Happy 4th of July.
Photo Credit: David Yu