June work report shattered expectations.
On Friday, it was announced that the Ministry of Labor was allocated 224,000 new jobs to the US economy, against the market's expectation of 165,000. After several months of slow job growth, the jump came as a surprise to many. Unemployment rose slightly to 3.7% from 3.6% in May.
The excessive wage growth confused the market, which expects a rate cut by the Federal Reserve later this month. Shares fell as a result of the move, while investor expectations of a 25 basis point decline in July increased to 91% from just over 70%.
With the Fed closely looking at these numbers, there is great uncertainty about what this job report might mean for investors. Here's what five experts think will come next:
Kenny Polcari, CEO of Butcher Joseph Asset Management, said the market is likely to slow down, but better days are ahead, especially if a deal comes soon:
"You Can I Never wanted the Fed, and if we still have that call about this pending fall in prices coming at the end of July, I suspect you might see the market back a little while today just because you had such a strong number, so maybe it is it a question of, should they do it? Should it be 50 [basis points]? Should it be 25? What did the market expect from what they think they are going to get now? And so it may be you look a little churn. But in the end I think it's going to find a lot of support. See, the other financial data is not as weak as everyone makes it. I think the economy feels like it's chugging together just fine, and therefore I think There are better days to come, but in the sh place term, there is a good deal of noise, much of it around the report today, much of it around, absolute trading, which is going on. But see, if we get a trade deal over the next 25 days before the Fed meeting, you can see that the entire Fed cut case comes right off the table because it's a strong economic job number, you have a trade deal that really looks as it is going to work ̵
Margaret Patel, senior portfolio manager at Wells Fargo Asset Management, said that if the Fed continues to be passive, it will help the economy grow:
" We see some downturn, reflecting their tightening and appropriate tightening last year, not only [in] housing, but also the inverted yield curve and other signs of corporate decline. So, I think if the Fed continues to be passive – the right course – and reduces prices, I think it will give more confidence in the business. And I really think the cycles we've had have all been caused by the Fed. If the Fed returns to a passive mode, there is no reason why we cannot get secular growth for years to come. There is nothing inevitable with a recession, unless the Fed outrages. "
Gordon Charlop, CEO and partner of Rosenblatt Securities, said that the data coming in the next two weeks will give the market clarity:
" I believe the investment community believes that interest rates are a preliminary conclusion. It's priced in. So maybe the fact that the job report came out as it did is people suggesting it might not happen, so they might try to return their expectations a little. But it has not been a tumultuous fall. It's a Friday after a holiday, the volume is about 20%. We are just kind of listless [ly] trading here, but I get no sense of this thing, which gives some speed to the downside, just a little lack of trading here. A few things, though, that you have to look forward to in the coming weeks: obviously comes revenue, and the question is what is the impact of tariffs and trading on these revenues, and how will they spin it if earnings come up short? So, it will be very interesting next week or two to see how it plays. "
Burns McKinney, portfolio manager at Allianz Global Investors, said that the assessment of all facts may not be necessary until later this year:
" I think it is very clear how stocks are trading and to some extent the movement is affirming as we have had in recent weeks: … very binary, very risky, risk-free based on interest rate policy and trade policy. And when you look at the fact [that] we had a very strong job report, the unemployment rate is close to the lowest it has been in 15 years, the shares are on holiday or near holidays, it suggests we might not expect [a rate cut] in July . That said, we believe that one to two speed cuts at some point this year, perhaps in September and December, are still likely to be based on Fed's desire to reverse an inversion in the yield curve and the fact that you have low-price imbalances. elsewhere. And what really matters for equity investors is not necessarily what the Fed does, but what they do in terms of what is desired or expected of the markets. … You know, if a kid goes to the show, and they think they're going to get three shots of ice and they only get two shots of ice, that's probably a little tantrum. And based on that, we suggest that stocks are not very cheap. It may be a little more volatile at some point later this year. And then one of the things we propose to our customers, perhaps a bit of a barbell approach where [you] gets a bit of your insult, not through necessarily growing areas, but through disturbances, things like mobile payments or cloud computing, and trying to find cheaper ways to play defense – perhaps not in the bond managers, but perhaps in the defense sector or perhaps the health sector. "