From the desks of Stanley Katz & Lauren Madera
HAPPY NATIONAL BOOK LOVERS DAY! WHAT ARE YOU READING TO CELEBRATE?
Markets took a decisive turn higher this week (DJIA: +2.96%, S&P 500: +3.57%, Nasdaq: +5.19%), and several major indexes closed at record highs. Favorable corporate earnings and renewed enthusiasm for AI stocks carried much of the load, driving the tech-heavy Nasdaq to its best week since April. The week’s defining data landed Friday, when the Bureau of Labor Statistics (aka BLS, the government agency that tracks national employment) reported that U.S. employers cut 23,000 jobs in July, the weakest reading since February and a wide miss against expectations for a roughly 80,000 gain. Revisions to prior months made the picture worse. June’s jobs gain was trimmed from 57,000 to 20,000 and May’s from 129,000 to 63,000. July marks the fourth consecutive month of slowing job growth. Counterintuitively, the unemployment rate ticked down to 4.1% because fewer people searched for jobs, not because more companies hired. Just one week after three Fed officials dissented in favor of a hike, odds of a September increase slipped to roughly 42% from about 55%. July inflation figures are reported next week and may carry extra weight now that the employment side of the picture has cooled.
American Century’s third-quarter outlook arrives at a useful moment, and their piece looks at the quarter through two lenses, growth and value. Their growth team, which favors fast-expanding companies, acknowledges the plain risk in a market at record highs that leans heavily on a handful of names. To American Century, a pullback is a question of timing, not possibility. Their more interesting argument is that the earnings backdrop and relative valuations look healthier than the record-high headlines imply. The firm argues the opportunity set reaches well past the AI names dominating the conversation into areas like space, biotech, robotics, and power generation. Their value team looks instead for companies trading below what the underlying business is worth, and that lens leads them to the domino effect of a disrupted Strait of Hormuz, the shipping chokepoint that has kept oil markets on edge all summer. Reopening a supply route is not the same thing as restoring supply. Shipping confidence, tanker availability, insurance, production restarts, and inventory rebuilding all move on their own timelines, and none of them move at the speed of a headline. Energy prices may, therefore, stay elevated longer than markets currently assume, and American Century expects disruptions of this kind to accelerate a broader rethinking of energy security.
Charles Schwab’s latest commentary tackles why investors are saying one thing and doing another. Attitudinal measures like surveys and sentiment indexes look distinctly cautious, and the spread between bullish and bearish responses sits nowhere near the levels that have historically accompanied market peaks. Yet margin debt, fund flows, and household equity exposure all point toward aggressive positioning. Schwab also documents how quickly the mood can flip, citing the Ned Davis Research ETF Speculation Index, which weighs money in funds betting on markets rising against those betting on a decline. It swung from extreme optimism to extreme pessimism in a matter of two weeks. Schwab’s central observation is that recent speculative excess has dissipated largely through sharp rotations rather than through a broad market decline. Where investors put their dollars tends to say more than what they tell a survey.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
American Century:
Schwab:
Argus:
Capital Group:
First Trust:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
Investing involves risk, including the possible loss of principal. The information contained herein has been prepared solely for informational purposes. Nothing contained herein should be construed as a recommendation to either buy or sell any security or economic sector, or implement any strategy discussed. Please consult with your financial advisor, accountant, and/or attorney before acting on this information. ClientFirst Financial Strategies, Inc. is a DBA of OneSeven, LLC (OneSeven). OneSeven is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training. Investment Products are Not FDIC Insured, Offer No Bank Guarantee, and May Lose Value.
OneSeven does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third parties.