Jobs Count: But How Do We Count Them?

The U.S. Bureau of Labor Statistics (BLS) released its monthly jobs report on Friday, May 5, 2017. As usual, investors and economists (including those at the Federal Reserve [Fed]) will pour over the data for clues regarding the health of the economy, as well as for insight into interest rates and other policies. Lately, many questions arise with each data release. Different rates measure a different scope of the labor market, specifically how those who have given up looking for work, or people working part time when they would rather work full time, are counted. The difference between these rates gives rise to questions, including which rate is correct and how to interpret the data.

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Five Reasons Not to Sell in May

“Sell in May and go away” is probably the most widely cited cliché in stock market history. May is upon us, which sparks a barrage of Wall Street commentaries, media stories, and investor questions every year about the popular stock market adage. This week, we tackle this widely cited seasonal pattern, but focus on some reasons it might not work this year.

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Reflecting on NASDAQ 6,000

The Nasdaq Composite hit 6,000 last week, more than 17 years after first reaching 5,000 in March 2000. The road from the first break above 5,000 to the 6,000 milestone was a long one. During the internet boom in the late 1990s, moves from 3,000 to 4,000 and 4,000 to 5,000 were quick, at 56 and 71 days respectively, before the long and winding road to 6,000 over the course of 6,256 days [Figure 1]. But after the 15-year journey back to 5,000 was completed in 2015, the Nasdaq traversed the next 1,000 points relatively quickly to break through the 6,000 level on April 25, 2017.

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Beige Book: Window on Main Street

The latest edition of the Federal Reserve’s Beige Book, released Wednesday, April 19,2017, continued to deliver a positive view of the U.S. economy. The Beige Book is a qualitative assessment of the U.S. economy and each of the 12 Fed districts individually. The report is prepared eight times per year, ahead of each of the eight Federal Open Market Committee (FOMC) meetings. We believe the Beige Book is best interpreted by measuring how the key words change over time. The qualitative inputs for the April 2017 Beige Book were collected in early March 2017 through April 10, 2017.

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Europe Enters The Tour De France

The next four weeks will be a major turning point for European investors. France is in the middle of what is arguably its most important election cycle since World War II. The results of the second round of presidential elections, as well as parliamentary elections scheduled for mid-June, will determine if France maintains its historical position as one of the primary advocates for European integration and identity or if anti-European candidates garner additional power. France is both literally and figuratively at the center of Europe, and the concern that it will become more anti-European may be having greater impact on the markets than is apparent at first. Even with pressing political issues, it’s important not to overlook corporate fundamentals, which have also been seeing a meaningful reversal. European corporate earnings experienced a strong rebound at the end of 2016, with consensus expectations from Thomson Reuters of another 20% increase over 2017. These are optimistic forecasts, and though certainly possible, combined with the political uncertainty has kept LPL Research from recommending European equities on a tactical basis.

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Which Breaks First, Stock Prices or Uncertainty?

Some significant technical trend lines are in play, so we take a closer look at market technicals and sentiment this week. The longer-term technicals continue to look strong, and an evaluation of global market breadth suggests the path of least resistance remains higher for stocks. However, sentiment remains a much more mixed picture indicating that market volatility could finally be heating up.

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Corporate Tax Reform Takes Center Stage

Over the next few weeks, analysis of the Trump administration’s first 100 days will increasingly dominate the news cycle (April 29 is day 100). From a policy perspective, all of the action (or lack thereof) will take place over the rest of 2017 and into 2018, which is a more realistic time frame for implementing major agenda items. During that time, corporate tax reform will likely take center stage.

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First Quarter 2017 Earnings Preview

The S&P 500 is poised for double-digit earnings growth in the first quarter. Earnings season gets underway this week and corporate America is poised to show a strong increase in its bottom line. The S&P 500 appears likely to produce doubledigit year-over-year earnings growth for the first quarter, powered by energy’s rebound from the oil downturn that battered the sector early last year. Last year’s first quarter marked the trough of the earnings recession as S&P 500 earnings fell 5%, setting up an easy comparison for the first quarter of 2017 [Figure 1]. This week we preview the upcoming earnings season. Continue reading “First Quarter 2017 Earnings Preview”

The $4.2 Trillion Dilemma

Minutes from the most recent Federal Reserve (Fed) meeting, released last Wednesday, sparked selling of stocks and bonds, as investors read that the Fed may reduce its $4.2 trillion balance sheet. Minutes also revealed that “some Fed officials viewed equity prices as quite high relative to standard valuation measures” and that there are “downside risks” if “financial markets were to experience a significant correction.” As we mentioned last week, we believe the stock market reaction to the Fed minutes was overdone, but nevertheless, investors should take the ending of Fed accommodation seriously.

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_I Want my GDP

BEA

On Friday, January 27, 2017, the Bureau of Economic Analysis (BEA) will release the first (“advance”) estimate of U.S. gross domestic product (GDP) for the fourth quarter of 2016.

While this is our first official look at GDP for the quarter, data that feed through to GDP started coming out several months ago, starting with data for October 2016, the first month of the quarter. As a result, compared with more frequent economic data points, GDP is quite backwards looking. By the time the BEA actually reports GDP, some of the data will be based on economic activity that had taken place almost four months prior.

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