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As a trusted advisor for others, we hope our regular updates will help you give those you serve some peace of mind in these volatile times.
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The major indexes closed moderately higher in a shortened trading week. Energy shares performed best within the S&P 500 Index as oil prices reached their highest level in two years. Consumer discretionary shares lagged, weighed down by a decline in Tesla. Trading volumes were generally light, as is typical of the start of the summer holiday season. Volumes would have been lighter still if not for concentrated buying and selling by retail investors of what some have termed “meme” stocks—smaller-cap, consumer-oriented shares actively discussed on social media. Shares of theater chain AMC experienced particularly heavy trading and volatility.
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The strength of the economic recovery remained in the spotlight, with Friday bringing the closely watched monthly non-farm payrolls report. The Labor Department reported that employers added 559,000 jobs in May, somewhat below consensus forecasts of around 650,000, while the labor force participation rate ticked down to 61.6% from 61.7%. On the positive side, the employment-to-population ratio—considered by some to be more important to Fed officials—ticked higher, and the unemployment rate fell more than expected, from 6.1% to 5.8%. Average hourly earnings rose 0.5%, above consensus and indicative of a tighter labor market.
Although the report offered mixed signals, stocks rose and longer-term bond yields decreased on the news, suggesting that most investors expected it would give the Federal Reserve additional time to keep monetary policy highly accommodative. On Tuesday, Fed Governor Lael Brainard and Vice Chair Randal Quarles both stressed that significant slack remained in the economy and that the Fed was far from achieving its inflation and employment targets. They both stressed, however, that the Fed would be quick to act if the recent increase in inflation does not prove to be “transitory.”
Much of the rest of the week’s economic data came in above consensus. Payroll processing firm ADP reported that its tally of private sector jobs increased by 978,000 in May, well above consensus expectations for a gain of 650,000. Restaurants and other leisure and hospitality businesses were responsible for 440,000 of the new hires, and service sector activity reached its highest level going back to 2009. Manufacturing signals generally remained strong, although construction spending grew less than expected and construction employment contracted.
As we continue to work our way out of the impactful events surrounding the pandemic, we have no doubt that markets are going to fluctuate erratically. Regardless, like a farmer that does not know what might come in the afternoon, we do not neglect sowing our seed in the morning. None of us know which will prosper, this or that, or whether both alike will be good (Ecclesiastes 11:6). Our team hopes to wisely invest and trust in God to provide understanding with the knowledge that we don’t need to fear anything because we have God! (Psalm 28:17)
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Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights
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