So last week we enjoyed a great market rally. We enjoyed it, that is, if you weren’t timing the market and afraid because of the previous downturn.
Friday’s hiring report was below expectations, and that’s great news. Expectations were 180,000. It actually came in at 150,000 and for perspective, September was a hair under 300,000.
What does that mean? That means the economy is beginning to lose steam. After years of being overheated, that’s not a bad thing because the slowing economy gives the Fed room to put an end to the rate hikes.
Rising interest rates hurt asset values. They hurt home values, they hurt mortgages, they hurt stocks, they even hurt bonds. Sure enough, last week, the S&P rose almost 6%. It’s the strongest rally since November 2022.
Moreover, yields on various bond durations dropped a little bit. Fortunately, we’ve already been moving out on the yield curve, so we’re locking in those yields three, four or five years out.
Inflation last year was 9% and boy did we feel it. Though it seems like it’s still high, I think what’s happening is we’re smarting from those higher costs. Inflation is already down to about 3.7%. We’re definitely within spitting distance of the 3% target that’s somewhat unofficial and a lot closer to the 2% official target that the Fed talks about all the time.
If there’s one lesson to be learned from this, it’s the very lesson I was trying to preach last week. The bulk of market returns occur in very small windows, and if you were out of the market last week, you didn’t get that 6%.
We wish you the best of investing success.
- Hughes, Jennifer, et al. “Wall Street Records Best Week in a Year after US Jobs Growth Slows.” Financial Times, Financial Times, 3 Nov. 2023