Market Recap – US Jobs Report Shows Weaker Than Expected Growth

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Market Digest – Week Ending 9/4

Following the worst month for stocks since 2012, September started in similar fashion. Stocks and commodity prices fell in the first week of trading, with the S&P 500 losing 3.4% for the week, which included August 31. International stocks, especially emerging markets, again suffered most. A US jobs report on Friday showed weaker than expected growth but was strong enough to leave chances for a September rate hike by the Fed still roughly a coin toss.

Weekly Returns:

S&P 500: 1,921 (-3.4%)
FTSE All-World ex-US: (-4.5%)
US 10 Year Treasury Yield: 2.12% (-0.06%)
Gold: $1,121 (-1.1%)
USD/EUR: $1.115 (-0.4%)

Major Events:

• Monday – Oil prices rallied, capping a 3-day 27% advance on speculation that US production was lower than believed and that OPEC may cut production.
• Monday – Apple and Cisco announced a partnership to help make Apple devices more useful on corporate networks powered by Cisco.
• Tuesday – China’s official manufacturing purchasing managers index for August fell to its lowest level in three years. Stocks fell.
• Tuesday – McDonalds announced it would begin selling breakfast items all day.
• Wednesday – A federal judge granted class action status to a lawsuit claiming Uber treats drivers like employees but does not offer necessary benefits.
• Thursday – European Central Bank President Mario Draghi indicated the bank is likely to expand its massive bond-buying program.
• Friday – The US economy added less jobs than expected in August, but unemployment fell to 5.1%, lower than any point since 2008 and considered by many to qualify as “full employment”.
• Friday – Hungary said it would bus stranded Middle Eastern migrants to the Austrian border after nearly a thousand who had been stranded in the country for days set out for the border on foot. It remained unclear if Austria would accept them. Thousands more remain.

Our take:

Having just experienced the first official stock market correction since 2011, it would have been too easy if the markets stabilized after just two weeks of sharp declines. We don’t expect volatility to remain as severe as it was in the final weeks of August, but markets are also unlikely to return to the extreme calm we enjoyed in the first half of the year. Investors will have to learn to deal with something in the middle. For those who have a strategic long-term asset allocation, it should be easier. None of us can control the market, so if you’re diversified and appropriately allocated, there isn’t much point worrying about weekly market gyrations – especially over a long holiday weekend.

Much of the world has bigger problems. The massive migrant inflow into Europe is causing further tensions between Eurozone members precisely when they don’t need it. Driven in part by ongoing conflict in Syria and surrounding areas, the issue is expected to worsen this year. Europe and the US tend to ignore the Middle East until there is direct impact, such as 9/11. Europe now finds itself the victim of strife in the region. Nothing is likely to happen soon, but it will be increasingly difficult for Europe, and ultimately the US, to avoid military intervention. In the meantime, thousands have died trying to enter Europe and the situation only grows worse for the millions directly impacted by war in and around Syria.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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