Let's start with US Employment: the headline number of a robust 227,000 new jobs in January was about 50,000 more than anticipated. However, as I frequently have stated, this is a number that is potentially subject to significant revisions and looking back to November, lo and behold, the data was revised from 204,000 to 164,000 so over the last 3 months of data, a net change of plus 10,000 (above the expectation)... overall, I think that we can basically call that a wash.
Wage growth stalled and is now down from an annualized 2.9% to an annualized 2.5%. That might not be good for the consumer.
More people were looking for work (they are more hopeful) and that pushed the unemployment rate up to 4.8%. And while the current psychology of the masses doesn't even consider a US recession a possibility, here is how our unemployment rate stacks up against the ever-telling 36 month moving average:
(a shout out to Paul and the Help team at Bloomberg for getting this chart functioning again!)
When they intersect, historically(white line moves up through the gold line), it has been a very accurate predictor of a recession to follow. The gold line is falling fast, the white line is leveling off (stay tuned).
Fed "watchers" suggest that the data isn't enough for a rate increase at the next meeting.
Good for stocks in general (perhaps not for the consumer durable sector), temporarily, anyway.
In other news... In order to prevent a financial crisis - like scenario from developing, the Dodd-Frank law was created back in 2010. This was intended to put more scrutiny on bank lending policies and practices. On Friday, President Trump signed an order to scale back the law that had added significant compliance costs to financial institutions.
Good for financial stocks.
And, a little closer to our world, a new Obama regulation called the "Fiduciary Rule" which was intended to force financial advisors to put their clients interests ahead of their own (and allay any potential conflicts of interest) was also put on the chopping block.
Good for advisor commissions, good for financial stocks, perhaps (in my humble opinion) not so good for the unsuspecting clients of less than fiduciarily responsible financial advisors in the US.
Fortunately in Canada, although the financial industry continues to resist, new CRM2 regulations have come into force and advisors at least must show all their commissions (and trailer fees!) It is not enough (MER's should also be shown), but it is a start.
At High Rock, the company receives a fee (we are not advisors, there is a huge difference, check out our intro:http://highrockcapital.ca/private-client-division.html ). Paul and I are paid a salary, not a commission. We also go above the required rules and regulations to ensure our clients that we have no conflicts of interest with an Independent Review Committee (IRC). You can visit our website to see the quarterly letter that is sent to our clients at http://highrockcapital.ca/index.html.
So, short-term, Dow is back above 20,000. Long-term, while details are skinny, it appears that all the Wall Streeters in the new administration are reducing regulations for their peers and quite possibly putting the general public at greater risk.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist