The May employment number caught market participants off guard last week, and the odds for a June rate hike look very slim. The weak employment number came after some strong economic data early in the week, with consumer spending and the manufacturing purchasing managers index exceeding expectations. Only 38,000 jobs were added in May versus an expected 160,000. The unemployment rate declined to 4.7% because 500,000 less people were looking for a job. At this point, I don't expect the Fed to increase rates in June, but a July increase is still a possibility.
Over the next few weeks keep an eye on these five items to see if a more definitive market trend will be developed:
- Janet Yellen's June 6 speech – these will be the first comments on the May employment report
- Results from the California Democratic primary – a Bernie Sanders win will keep uncertainty high
- FOMC statement and future guidance with the dots
- Brexit vote on June 23 – the latest polls from this weekend show Brexit favored
- June employment number - needs to show a rebound or economic momentum may be in question
I expect the market to remain range-bound, but I am growing more concerned about the fragility of economic growth and stock market momentum.
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.