Stocks moved higher this week after Congress reached a temporary agreement to raise the debt ceiling, setting up the next confrontation for December. The September jobs report came in worse than expected, but likely not bad enough to dissuade the Federal Reserve from beginning down the path of tapering bond purchases before the end of the year. Rising energy costs in several global markets continue to stoke inflation concerns, providing the latest challenge to the Fed’s contention that inflation is transitory.
For the week, the S&P 500 Index finished up 0.8%, while the Dow Jones Industrial Average rose 1.2%. Year to date, the S&P is up 16.9%; the Dow has gained 13.5%. Unemployment claims data flipped back into positive territory, as first-time applications fell more than expected to 326,000, while continuing claims fell to 2.7 million. Although the unemployment rate fell to 4.8%, it resulted mainly from a reduction in the labor force participation rate. The COVID-19 delta variant still appears to be negatively affecting the labor market, as evidenced by September’s job growth number of 194,000 – the lowest monthly total of the year.
Even in the face of a less-than-stellar jobs report and higher energy costs stemming from extensive supply-and-demand imbalances, our medium-term outlook for the economy and stocks remains positive. As the pandemic slows, strong consumer and corporate balance sheets will sustain economic expansion. Inventories must be rebuilt and supply chains pieced back together – conditions that should support above-trend economic growth into and through 2022. Central banks (especially the Fed) will continue to telegraph every move, so as not to surprise markets while they gradually end pandemic-related monetary stimulus and normalize interest rate policy.
For more insights, check out the recording of our “Back to Better” webinar now! The webinar features interviews with Patience Shutts, facilitator and creator of Wise Within workshop, and Jeff Kleintop, Charles Schwab’s Chief Global Investment Strategist. Jeff and Patience offer up a range of tips and perspectives on the economy and personal well-being.
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