Bellevue Perspectives

Monday Minute

  • From our research partners at Strategas, “68% of the S&P 500 traded to a 20-day high yesterday (Wednesday), marking one of the best readings in 50 years, and consistent with the momentum thrust you want to see in the initial few months off a major low.”  This is one of their most important indicators and ”a surging new high list can be climactic in the short-term (performance over the next 1 to 2 months is often soft), but is very bullish longer-term (forward performance and positive hit rates +6 and +12 months often come in well above the historical averages).” They believe that the overbought conditions may stall, but possibly as a setup for continued strength beginning again in mid to late summer.
  • Friday morning before the opening bell the Labor Department reported that the economy gained 2.5 million jobs during May, a huge positive surprise against expectation for losses of 8.3 million.  The numbers show the unemployment rate fell 1.4 percentage points to 13.3%, a result that was much better than expected compared to estimates of 19.5%.  The labor force participation rate, which accounts for the number of Americans looking for work or currently working, increased 0.6 percentage points to 60.8%.  The report was cheered with the SP500 trading higher by 2.62%.  News over the weekend and today paint a different picture however.   It now seems that the jobs report has been inaccurate for the last two months.  BLS has admitted that government household survey takers mistakenly counted about 4.9 million people as employed, although they were unemployed.  “Had the mistake been corrected, the unemployment rate would have risen to 16.1% in May. The corrected April figure would have been more than 19.5%—rather than 14.7%.”  This correlates closer with the ADP report earlier in the week (fist bullet point). The markets shrug it off and trade higher on Monday.

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