I decided to wait until after the Presidential debate to write this week’s post, as the potential for something totally unexpected and market-moving seemed very high.
Last week the release of the September employment report confirmed the continued moderate pace of improvement in employment. For the month, 156,000 new jobs were created, which was slightly below the consensus of 172,000. The unemployment rate ticked up by 0.1% to 5.0%, caused by an increase in the labor force participation rate. This continues the trend of the increase in labor force participation which, in my opinion, is the most important positive aspect of the report. As more people enter the labor force, it reinforces that both job gains and the expectation of future job gains have improved.
Last week interest rates continued to creep higher. The 10 year U.S. Treasury rose 12 by basis points to 1.72% while the S&P 500 Index was down by less than one percent.
I continue to expect the next few months to be challenging for asset prices as uncertainty with earnings, political risk and central bank policy put pressure on valuations. Keep an eye on any more information on the cause of last week's flash crash in the British Pound.
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