Last week the major US stock market averages closed out July and started the month of August on a negative note. These recent declines have left the S&P 500 with a gain of just 0.91% year-to-date. If you would like to get our detailed take on the situation, you can read Traveling on a Long Road to Nowhere?.
While the last few trading sessions have been to the downside, the economic picture here in the US is looking up. According to the latest labor Department report, employers hired 215,000 new workers in July. This hiring trend caused the jobless rate to hold steady at 5.3% and the U-6 rate, which measures unemployment + underemployment, ticked down to 10.4%.
This strength in employment is causing some analysts to predict the Federal Reserve will raise short-term interest rates in September. Don’t fear an interest rate hike (at least not yet). History tells us the first rate increase signals we are still in the middle of an economic cycle. It also signals that we may have another two years of cyclical growth before entering the late stage of an economic cycle. You will hear a lot of chatter about the impact of rising rates, but don’t let it spook you. As we all know a change no matter how big or small, will cause some investors to get nervous — don’t let it be you.
If the job growth didn’t signal the economy is improving, personal spending improved month-over-month more than analysts expected and the recent Institute for Supply Management (ISM) service sector report came out with 15 out of 18 fields reporting growth. Their non-manufacturing PMI rose 4.3 points to reach 60.3 in July. This is the highest mark in the 7-year history of the report.
If you would like to see a review of the major market index returns, click here to get the report.
