It seems that it was just last week that we were happily comparing the excellent latest BLS Non-Farm Payrolls Report to the previous month’s disastrous one. It seems like that because it actually was just last week. On and around the same date additional numbers have also escaped into the wild and we are still smiling. Among the many other smiling people is Brian Wesbury, the Chief Economist at First Trust Advisors. Brian and his team put out a piece this week that they confidently called ‘Economy on Very Solid Ground’. They generously gave us permission to pull a few nuggets. We did and we share them here:

“Last Friday showed payrolls rose 196,000 in March after a temporary lull in February. And while average hourly earnings rose a smaller than expected 0.1% in March, they’re up 3.2% in the past year, an acceleration from the 2.8% gain in the year ending in March 2018.”

“At least one analyst noted that the average change in payrolls in the last three months (180,000 per month) is the slowest since late 2017. This is 100% true…and 100% irrelevant. The three-month average bounces around all the time; since 2014 that average has been as high as 291,000 and as low as 136,000. What these analysts are doing is exploiting the fact that payrolls grew only 33,000 in February, pulling down the short-term average.”

I must say here that we still think the Feb super-low number was a simple anomaly, likely related to the ‘federal shutdown’. Anyway, back to Team Brian.

“Meanwhile, new claims for unemployment insurance fell to 202,000 last week, the lowest reading since 1969. If you expect a recession to start soon, this data doesn’t support it. Claims usually start to creep up before a recession starts; no sign of that now.”

“Another piece of good news was that auto sales (cars and light trucks, both included) increased 5.3% in March to a 17.5 million annual rate. As a result, our early estimate for retail sales for March is an increase of 1.0%.”

“Given the strong data, forecasters have been ratcheting up their Q1 real GDP estimates, which now stand around 2.0%. That’s a far cry from the 0.2% estimate a month ago, and strong retail sales growth for March means a higher starting point for the economy in Q2.”

As we often say, the economy and the market are not the same thing but that is not to say they are not inextricably linked. The main thing that separates them is that what we see as ‘the economy’ is largely a picture of the present and the recent past while ‘the market’ is — on any given day — a picture of what the investment community either hopes it will be or fears it might be.

Ron’s Market Minute 4/12/2019 — S&P Breaks 2900

Well, it’s been a while since the S&P 500 has been above the 2900 level. The last time we were at that height was the beginning of October last year…just before the bottom dropped out.

Before you raise your eyebrows too high let me quickly point out that there is little similarity in the current environment and last October’s. As Yogi Berra famously said, ‘Making predictions is hard, especially about the future’. So, while optimism is the dominant mood, a bit of caution is warranted. Isn’t it always?

Healthcare and Pharmaceuticals started this past week under the weather and have not yet found much improvement. In contrast Financials and Banking dug themselves out of the rut they were in, except of course for Wells Fargo (whose problems are more of their own making). As I write this JPMorgan gave a nice earnings report this morning and the stock, JPM, is collecting a lot of interest — up 6%. Some noteworthy drama over in the Services sector as Disney announced its new streaming effort: DIS shares are up close to 10% and most of that gain is also Netflix’s loss. No surprises there.

Elsewhere, the University of Michigan Consumer Sentiment numbers turned in what look to be a pair of contradicting numbers. The Consumer Expectations number fell fractionally to a reading of 85.8 while the consumer’s view of ‘Current Conditions’ rose to a lofty 114.2. That’s three consecutive months of improving numbers.

Enjoy your weekend.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

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