Three Big Indicators

Lately, lots of reports are discussing the job’s numbers being off, but, that’s only one of three main indicators of the market. The three main indicators are the jobs number, wage growth, and productivity growth. These three indicators are interconnected. We’re seeing a lot of news coverage on the February jobs growth. The wage growth and the productivity growth, that we are overlooking, is the best it has been in a decade. All of that information proves that you can’t just focus on the job numbers being down, you have to look at the other two indicators as well.

Bull Market Anniversary

Last week the market celebrated its 10-year bull market anniversary. However, it’s important to point out that it hasn’t consistently gone up for 10 years. Technically, there’s been 3 bear markets in the past 10 years. A bear market is defined as a 20% pullback in one of the indexes. In 2011 three of the indexes fell 20%. In 2015 the Russell 2000 Small Cap and the NASDAQ fell 20%. Last year, in 2018, the Russell and NASDAQ fell 20%. Last year the S&P was very close, falling to 19%. It hasn’t been a consistent bull market. It’s been a volatile 10 years. People tend to forget those low points. People tend to forget the U.S. Debt downgrade in 2011, oil prices increased in 2015 and just a quarter ago we were down 20%. So, even though it’s the 10-year anniversary of the bull market, it has seen its share of low points as well.

Wages and Job Numbers

Last week we talked about wanting the job growth report to be an “x-factor” for the economy. The report came out and wasn’t as good as we expected. Over 180,000 jobs were estimated to be added in February but the number reported was only 20,000. We have had a lot of good job growth in the last few months which we think has made our expectations rise. We think those expectations are going to start to lower, which could be a good thing. If that occurs, we think we will see some of the volatility start to fade away and maybe get a little boost back in the markets. The jobs number is important and is an indicator of the health of the economy. It’s been said that good companies hire and bad companies fire. It’s not just hiring that moves the market but also wages. As companies are trying to get new people on board, they must raise wages. New people typically get paid more. The new employees then go out and spend that money. That shows an indication of health or productivity and shows that companies are making more money. The jobs number is important because it shows consumer sales and consumer confidence which goes towards the bottom line of companies in the market. If companies are not hiring and not making money, chances are their stock prices are not going to go up. That’s why we like to watch this each month because companies slow down their hiring well before they report bad earnings. It’s important to watch this for an indication of future poor numbers, or, to see if it’s a one-off. It’s also important to remember that the jobs number is a government survey that can have an error of either +/- 100,000 jobs. This number will be revised and with the wage number being good, we expect it’ll be revised high. What’s also big is the consumer confidence numbers for the month. That’s a leading indicator and showed the consumer jumped in confidence from January to February. If people aren’t getting hired, they’re likely not going to be confident. This bad number that everyone is reporting had good wages and good productivity backing it. Therefore, it’s commonly not considered a bad number and probably just a one-off or fluke. Also, average hourly earnings went up 3.4% year-over-year which is another positive to go along with that information. We will continue to watch this as reports continue to be released.

Future in Robotics?

Robotic purchases for small and medium size business in 2018 were higher than they have ever been. There was major growth within the small and medium-sized businesses outside of the automotive industry. Historically, we haven’t seen a lot of robotics in that space. It was mostly large manufacturing and within the automotive industry. Robotics are mainly used for material handling and things like spot welding that you would see in auto manufacturing. Now, there is a lot of small to medium-sized businesses interested in them and when prices come down, they’re buying robotics. Robotics provide more productivity which gives more wage growth. It is all linked. Unemployment is at an all-time low so one of the things we’re looking at in 2020 is that robotics may become a topic in job replacement for people. It won’t be because the economy slows down but because technology has advanced.

 

Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®
Senior Vice President
Wealth Consultant
Email Bobby Norman here

Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here

Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here

Adam Vansant
Associate Vice President
Wealth Consultant
Email Adam Vansant here

 

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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