June 7, 2016
Fed Rate Hike Stalled as Analysts Whiff on Jobs Report
Statistics means never having to say you're certain, and that was certainly true last week.
The employment report, which was released on Friday, was a bit short on jobs. Analysts had predicted employers would add about 162,000 new jobs during May, according to CNBC. Instead, a paltry 38,000 jobs added to payrolls.
The United States Department of Labor focused on the fact the United States has experienced 75 consecutive months of private-sector jobs growth, as well as the significant decline in unemployment. The unemployment rate fell from 5.0 percent to 4.7 percent - but it was largely attributed to Americans leaving the labor force.
United States Secretary of Labor Thomas E. Perez commented, "At this point in a recovery, we expect to see trade-offs between job growth and strong wage growth. Earnings growth in May was encouraging. So far this year, average hourly earnings for private employees have increased 3.2 percent at an annual rate."
The anemic employment report triggered concern that U.S. economic recovery may be slowing. That, in turn, means the Federal Reserve may not implement measures designed to push interest rates higher during its June meeting. CNBC reported the probability of a Fed rate hike dropped from 21 percent to 4 percent after the employment report.
U.S. markets were nonplussed. Barron's reported the Standard & Poor's 500 Index finished the week flat. The Dow Jones Industrial Index moved slightly lower, and the NASDAQ showed a slight gain.
|Data as of 6/3/16||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor's 500 (Domestic Stocks)||0.0%||2.7%||-0.7%||8.6%||10.1%||5.2%|
|Dow Jones Global ex-U.S.||0.7||0.0||-12.6||-1.0||-1.5||-0.3|
|10-year Treasury Note (Yield Only)||1.7||NA||2.4||2.1||3.0||5.0|
|Gold (per ounce)||2.0||16.8||4.2||-4.0||-4.2||6.8|
|Bloomberg Commodity Index||1.9||10.9||-13.7||-12.9||-12.1||-6.9|
|DJ Equity All REIT Total Return Index||1.0||7.6||13.7||10.2||11.3||7.0|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
Your Purchasing Power State to State
What are your wages worth? We've written about The Economist's Big Mac Index, which is a lighthearted way to gauge whether countries' currencies are at the correct levels - just compare the price of a hamburger in each country. At the start of the year, you could buy a Big Mac pretty cheaply in Russia ($1.53), Hong Kong ($2.48), or Taiwan ($2.08).
There are differences in how much things cost from state-to-state, too. Pew Research Center used federal wage data to determine which regions of the United States had the lowest and highest wages after adjusting for differences in cost-of-living:
"As we've noted before, prices for everything from housing to groceries vary widely from place to place, with the result being that a given income can mean very different things in New York, New Orleans, or New Bern, North Carolina. To get a handle on those variations, one can use the"regional price parities," or RPPs, developed by the federal Bureau of Economic Analysis. The RPPs measure local price levels in each of the nation's 381 metropolitan statistical areas, as well as the nonmetropolitan portions of states, relative to the overall national price level."
The highest weekly wages for 3rd Quarter 2015, after adjusting for cost-of-living, were found in: 1) San Jose-Sunnyvale-Santa Clara, California, 2) California-Lexington Park, Maryland, 3) San Francisco-Oakland-Hayward, California, and 4) Seattle-Tacoma-Bellevue, Washington.
The lowest wages, after adjustment, were paid in: 1) Yakima, Washington, 2) Wenatchee, Washington, 3) Logan, Utah-Idaho, and 4) Grants Pass, Oregon.
Weekly Focus - Think About It
"The best fishermen I know try not to make the same mistakes over and over again; instead they strive to make new and interesting mistakes and to remember what they learned from them."
—John Gierach, American author (and fisherman)
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative's Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Consult your financial professional before making any investment decision.
- Stock investing involves risk including loss of principal.
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other (Click on U.S. & Intl Recaps, then "Shock wave," and scroll down to Global Stock Market Recap chart) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-06-16_Barrons-Global_Stock_Market_Recap-Footnote_4.pdf)
IRS Circular 230 Disclosure: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on this matter.
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
It's a busy world. Our newsletter helps keep you tuned in to major market events, money-saving opportunities, filing deadlines, and other important information. One email per week and no spam — promise.Subscribe