STRONGER THAN EXPECTED DATA SPOOKED THE MARKETS

Yesterday’s data was stronger than expected.  According to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), there are now 1.9 jobs for every unemployed person.  The number of job openings rose to 11.2 million, near its historical record.  The median estimate was for a decline to about 10.4 million.  The prior month’s data was also revised higher to 11.04 million from 10.6 million.

Wow!  To ask the obvious question, why are workers not returning to the labor force?  Friday’s BLS Labor Report is expected to report the labor participation rate (LPR) is hovering around 62.1.  This nominally higher than the all time low of 60.2 measured in April 2020, it is still considerably lower than the pre pandemic rate of 63.4 and has been downward sloping since March 2022.

And then there is consumer confidence.  Confidence is now at the highest since May rising sharply from July’s reading off 95.3 to 103.2.  The median forecast called for a rise to 98.  The Conference Board indicated the majority of the rise is attributed to the decline in gas prices.

Markets reversed direction on the data, closing again lower on interest rate fears.

Speaking of interest rates, Bloomberg stated its Global Bond Aggregate Index is down 19.7% from its record high in January 2021.  This is the steepest decline and first bear market for fixed income in over a generation.

Rising rates has made it difficult sledding for global equities.  The MSCI Inc.’s index of global equites has lost 16.4% so far this year on a toral return basis according to Bloomberg.  These losses have produced a negative 17.2% return for the popular 60-40 portfolio according to Bloomberg.

Changing topics, it was reported last week by the National Energy Assistance Directors Association (NEADA), one in six households are on the verge of their electricity being disconnected for lack of payment.  NEADA cites surging energy and food costs as a major cause.

How will this unfold?   Will there be massive shutoffs during the winter month?  Will government intervene to ensure that such cut offs do not occur?

It is widely accepted a major reason for today’s surging electricity prices is the lack of reliable and redundant capacity from green energy.  The yields forecasted are not materializing.  This environment is amplified by Ukraine and the lack of infrastructure investment in traditional energy sources and regulatory fiat.

What will happen today?

Last night the foreign markets were down.  London was down 1.17%, Paris down 0.69% and Frankfurt down 0.67%.  China was down 0.78%,  Japan down 0.37% and Hang Seng up 0.3%.

Dow and NASDAQ futures are up 0.25% and 0.50% ahead of several key economic statistics released in the next several days including Friday’s release of the all-inclusive employment data. The 10-year is down 10/32 to yield 3.14%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.