The State of the Market - Signals From the Sidelines

By: Edward Jones
DEWITT, Mich. - Sept. 12, 2023 - PRLog -- Key Takeaways
  • After a batch of softer employment figures two weeks ago, data last week offered a still-bright picture of the economy, with productivity and ISM services figures both consistent with ongoing growth.
  • A steepening of the yield curve and outperformance by cyclical investments in recent months are additional trends that support the case for a broader bull market.
  • We don't think the coast is completely clear, and the combination of employment and inflation trends will govern Fed policy ahead, which in turn will govern near-term market moves. This week's upcoming consumer price index (CPI) report should confirm that inflation pressure remains on a path of moderation. However, rising oil prices and persistent shelter costs could complicate the falling inflation story, and thus serve as a catalyst for market swings.
There has been plenty of motion to evaluate of late, but if we boil it down, there are two primary factors quarterbacking the financial markets: the labor market and inflation. Essentially, investors are rooting for the former to rise and the latter to fall, however, reality isn't that simple, and these two trends are not mutually exclusive.

Two weeks ago, a batch of employment data indicated the labor market is softening. Rates fell and stocks rose on the premise that this would be helpful for inflation, and thus Fed policy. Last week, markets ran toward the other endzone as incoming reports painted a healthier jobs picture, and the spotlight shifted toward potential implications for inflation ahead, with a fresh read on the CPI due out this week.

In the same way that a quarterback gets the bulk of the credit for both wins and losses, it's appropriate that markets are tightly tethered to employment and inflation developments. That said, here are a few trends playing out that, while getting less fanfare at the moment, offer additional signals about the state of the market:

Edward Jones - Mae Luchetti
Source:Edward Jones
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