There was a lot of news today that, on balance, didn't move the needle much in the financial markets, which are marking time until August's PPI and CPI reports are released on Wednesday and Thursday, respectively. Let's review all the non-events today:
There was a lot of news today that, on balance, didn't move the needle much in the financial markets, which are marking time until August's PPI and CPI reports are released on Wednesday and Thursday, respectively. Let's review all the non-events today:
(1) Gold & geopolitics. The nearby futures price of gold jumped to yet another record high of $3,707 per ounce this morning on news that Israel attacked the leadership of Hamas in Doha, Qatar. Profit-taking pared some of the gain by early afternoon. The gold spot price is on track to reach our $4,000 target by the end of this year (chart). That has been our target since the price rose above $3,000 earlier this year. We turned bullish on gold when it rose above $2,000 last year.
On September 6, Bloomberg reported that the People’s Bank of China increased its gold holdings in August for a 10th month, in a continued push to diversify its reserves away from US dollars.
(2) Uncertainty. There has been considerable uncertainty since Donald Trump won the 2024 presidential election in November. Uncertainty remained high after he imposed tariffs earlier this year. The Uncertainty Index, compiled by the National Federation of Independent Business (NFIB), reached a record high of 110 in October 2024, just before the election (chart). It has remained elevated but was down to 93 in August. Apparently, many of us are learning to live with high uncertainty resulting from Washington's erratic policymaking. As we've observed many times before, it is impressive how well the US economy and stock market perform despite Washington's meddling.
(3) Labor market. The US economy likely created 911,000 fewer jobs in the 12 months through March than previously estimated, according to the preliminary annual benchmark revision produced by the Bureau of Labor Statistics (BLS). It implies that nonfarm payroll gains averaged about 71,000 per month instead of 147,000. A final benchmark revision will be released in February along with the BLS's employment report for January.
The negative spin is obvious: The labor market is weak, and so is the economy. Our positive spin is that the revisions confirm that the monthly "breakeven" payroll gain may be 75,000 rather than 150,000. This revision won't change the unemployment rate, which had been running around 4.0% during the revision period. Furthermore, the benchmark revision implies a significant upward revision in productivity over the past few quarters!
August's NFIB survey showed that the percentage of small business owners reporting job openings and plans to hire over the next 12 months remained above their historical averages (chart).
Then again, the NFIB job openings series suggests that the JOLTS version of this series continued to fall in August (chart).
(4) Global stocks. The forward earnings of the S&P 500 LargeCaps continue to soar in record-high territory (chart). It has been driving the bull market since August 2020. The forward earnings of the S&P 400 MidCaps and the S&P 600 SmallCaps have been flat-lining since late 2022. They might finally be showing some signs of life. Stay tuned.
The Stay Home investment strategy remains on an upward trend relative to Go Global (chart). The following chart corrects an error in a similar previous chart we showed recently. The US accounts for 65% of the market capitalization of the All Country World MSCI. The previous chart used the World MSCI, which does not include Emerging Markets.
