Fed Tapering

Last week was a big week for economic news. The Fed had a meeting to discuss tapering on bond purchases and the jobs data came out. We’ve been hyper-focused on jobs since the recovery began because that’s what the Fed told us they were mainly focused on. The Fed’s stimulus has been a huge tailwind to the stock market over the last 18 months. Depending on how the Fed reacted to the strong jobs data and how the market reacted to the Fed’s tapering news, would tell us a lot. So, what happened last week? The Fed announced they were going to reduce bond-buying by $15 billion per month. That should take them around eight months to get down to a point where they are no longer providing stimulus if they stick to that path. The jobs number came in strong with 531,000 jobs created in the month of October. You can see on the chart shown in the video for this episode, that the jobs number is much higher than the previous month. It is still down compared to where we were in mid-summer. This report completely flipped so, we’re going into the fourth quarter with what appears to be a stronger economy. In these times of transition where we’re going from easy monetary policy to a more hawkish monetary policy, we’ll see these tailwinds in the market when the good news becomes bad news. We’ll see good economic data, but the market will fall because the positive data now means that the Fed may raise interest rates. We recently received good economic data and now the Fed is pulling back a little bit of stimulus. The market continued to rally which shows that maybe the economy is close to standing on its own two feet and that is a positive sign for long-term market strength. You can’t have a pure stimulus-driven economy. This transition with these additional jobs is very good information on top of the fact that we still have a lot of jobs to add. So, there’s more growth in front of us. Another chart shown in the video for this episode shows where we were in total employment before the pandemic. This chart shows that we still have millions of jobs to add back which is GDP growth potential that’s still out there. Another chart shown in the video shows that the average hourly earnings have gone up. That means that these new employees are coming back at higher-paying jobs which means more money in the economy and more money for consumers to spend. All that’s very positive and could give us more legs into next year and potentially economic growth.

Tariff Talk

Last week, the G20 summit was held in Rome where the U.S. and the European Union agreed to do away with some of the tariffs. The U.S. is stopping tariffs against the E.U. for steel and aluminum. They’re trying to get the supply chain issues that we have experienced recently, corrected. The E.U. in response agreed to end their retaliatory tariffs against the U.S. on some of our goods. There were plans for new tariffs to be put in place on December 1st, but they decided to pull back on those. You can expect to see more talks in the future with Japan and the U.K. regarding the steel and aluminum tariffs. Don’t expect to see anything with China come up anytime soon because the U.S. is still working out some issues with them. The U.S. is trying to get some of the supply chain issues resolved and is hoping this along with the infrastructure bill should really do that.

Technical Analysis

Historically, November has been a very strong month for the markets. This has at least held true for the first week of November, with the S&P 500 closing at a price of 4,697 this past Friday. That gives us a new resistance level of 4,730 and a new support level of 4,670. We also see the year-to-date moving average sitting currently a little over 4,200. The fundamentals such as earnings, the Fed tapering, and others, are coinciding in a good way with the technical analysis. We’re going to see if we can keep this momentum going through the end of the year. These are things that the bears grabbed for when talking about hyped-up emotion and hoping that these things would bring the market back down. We stay paranoid and make sure that we’re watching every aspect to see what could cause market volatility. Technical analysis with a combination of fundamental analysis and tying it to our client’s Financial Blueprints to see where they are helps tremendously here at Fi Plan Partners.

 

 

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

Trey Booth, CFA®, AIF®
Chief Investment Officer
Wealth Consultant
Email Trey Booth here

Adam Vansant, AIF®, BFA
Vice President
Wealth Consultant
Email Adam Vansant here

Ty Miller
Associate Vice President
Email Ty Miller 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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