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Strong Jobs Report Helps US Equities Pare Weekly Losses

Market Digest – Week Ending 12/6

Stocks fell every day of the week except one. A positive reaction to a strong jobs report on Friday was enough to bring the S&P 500 back close to even. Unemployment ticked down to 7%, and average wages rose more than expected. Q3 GDP growth was revised up to 3.6%. Both reports led many to believe the Fed will begin tapering bond purchases in the next few months. Bonds fell for the week.

Weekly Returns:

S&P 500: 1,805 (-0.1%)
FTSE All-World ex-US: (-1.3%)
US 10 Year Treasury Yield: 2.86% (+0.12%)
Gold: $1,228 (-1.8%)
USD/EUR: $1.370 (+0.9%)

Major Events:   

  • Monday – The National Retail Federation said shopping over Thanksgiving weekend declined 2.9%, but online spending on Cyber Monday was expected to be strong.
  • Tuesday – The U.S. Supreme Court, by not taking action to prevent it, effectively gave the green light for states to collect sales tax on online purchases.
  • Tuesday – Detroit became the largest city ever to become eligible for bankruptcy protection.
  • Thursday – Q3 US GDP was revised up to 3.6%.
  • Thursday – Nelson Mandela, one of the world’s most cherished leaders, passed away at his home in Johannesburg. He was 95 years old.
  • Friday – The US economy added 203,000 jobs in October, beating expectations. The official unemployment rate dropped to 7.0%.

Our Take:

Last holiday season, it seemed most expected the US to fall back into recession. This week’s encouraging economic data brings to mind one of my favorite quotes:

“Any man who is bearish on the United States will go broke.”

-J P Morgan

For those on the sidelines, it has been a painful year to miss out on stock returns. US Equity valuations have become slightly rich, and complacency has risen. This makes a repeat of this year’s banner stock returns less likely, but there is good reason to be optimistic for 2014. Growth is moderate but accelerating, unemployment is high but declining, and wages are slowly rising. Meanwhile, inflation is tame, stocks are up, and so are home prices. It doesn’t feel like a time to be greedy, but then again it very rarely is. Those positioned with a strategic, global, multi-asset class asset allocation should be feeling pretty good.


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