Economy
While we didn't get the "official" jobs report from the Bureau of Labor Statistics this week, payroll processing company ADP put out their own report showing the US economy added 42,000 jobs last month. This was the first positive number in the last three months, and was more than economists had been expecting. Still, we're a long way from where we were last year when the report was showing ~200,000 new jobs per month. The media has dubbed the state of the labor market as slow to hire and slow to fire. While we aren't seeing growth in jobs numbers, we aren't seeing widespread layoffs and rising unemployment. There's a slight caveat here in that since the government shutdown over a month ago, we haven't seen any jobs data from the government agencies that usually report on these things.
Markets
Volatility returned to the markets this week as AI-related valuations came under scrutiny. For the week, the S&P 500 closed 1.63% lower. The selloff was largely driven by tech stocks, with the Nasdaq having it's worst week since early April when the tariffs were announced in the Rose Garden. Zooming out, a pullback here was probably warranted (and healthy) as the market's been on a heater since mid-April. We haven't even seen a 5% pullback since the April lows, which is usually a common sighting in the stock market.
According to FactSet, we're about 90% of the way through earnings season, and more companies are beating their estimates than usual. Not only that, but earnings have grown by more than expected. It's looking like we'll see the fourth consecutive quarter of double-digit earnings growth, and the twentieth consecutive quarter of revenue growth. There may be real concerns about valuations in the market, but this bull market gets the benefit of the doubt, and there are real profits and growth backing up those valuations. Could we be in an AI bubble? It's possible, but when profits are growing this fast and profit margins are widening, we're likely not in "frothy" territory.
What We're Reading
Have a great weekend.
Dogwood Wealth Management