Weekly Review – Bad News is Bad

What Happened: August Jobs report comes in worse than anticipated. Stocks sell off on the news.?

What Does it Mean???

In our view, bad news is no longer good news for stocks. For the past year, many economic reports released lead to stocks advancing in a ‘bad news is good for stocks’ world due to inflation and interest rates. In my opinion, this has changed with the general idea being the Fed may be significantly behind the curve with respect to the softening economy. Throw in seasonality which suggests September to be a particularly difficult month for stocks and we think you have the making for a sell-off that may be just getting started.?

Why Do We Care??

From our perspective, employment levels—one of the Fed’s primary indicators for inflation and one of their two mandates (the other being steady employment)—are a significantly lagging measure of the current state of the economy. Historically, in my opinion, the hiring and firing of employees were much more fluid than they are today. After COVID, finding workers became incredibly challenging, and this was one of the most difficult aspects for small and medium-sized business owners. Nearly every client we worked with who employed people expressed the same frustration: "We can’t find workers."?

Now, recent data suggests that these same businesses are shedding or laying off employees. This raises the question: How bad must business conditions be for companies that once struggled to find workers to now let them go? For this reason, I believe employment data in this environment is a lagging indicator of the true state of the economy. Hence, I also believe that the Fed is considerably behind in its rate-easing cycle. Friday's market selloff suggests I’m not alone in this line of thinking.

Despite the short-term weakness, I find it difficult to become overly bearish. We are heading into an election, and I believe the Fed still has considerable firepower to re-stimulate the economy, even if they are a few steps behind. Additionally, given that markets have already had a strong year, in my opinion, an autumn decline is not only expected by many but often sets the stage for an October bottom and a Santa Claus rally.

Since we've already taken steps with clients to reduce risk—particularly within the technology sector—we don’t plan to make further moves just yet. Instead, we'll monitor the selloff’s developments and adjust accordingly. Our view remains that market weakness at this stage presents more of an opportunity than a warning sign.

Until next time

~ Quint

Did you know??Joule works with clients all throughout the United States. With our process of utilizing technology and online planning portal, there is no geographic limitation to whom we can help. If you need a second opinion or want to explore what an advisory relationship with Joule would look like, review more info on our?site?and we'd be happy to discuss your current situation.

Disclosures

Joule Financial, LLC is registered as an investment adviser with the SEC. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by securities regulators nor does it indicate that the adviser has attained a particular level of skill or ability. A copy of Joule’s current written disclosure brochure filed with the SEC which discusses among other things, Joule’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov

This does not constitute an offer or solicitation. This information should not be considered investment advice. Opinions expressed reflect the judgment of the author and are current opinions as of the date appearing in this material only. While every effort has been made to verify the information contained herein, we make no representations as to its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Past performance does not predict future results. Content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. All investing involves risk, including the loss of some or all of your investment.

Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.

Hyperlinks in this letter are provided as a convenience, and we disclaim any responsibility for information, services or products found on websites linked hereto.

Specific investments described herein do not represent all investment decisions made by Joule. The reader should not assume that investment decisions identified and discussed were or will be profitable.?Specific investment advice references provided herein are for illustrative purposes only and are not necessarily representative of investments that will be made in the future.

All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. There are no assurances that an investor’s portfolio will match or outperform any particular benchmark. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses.