Week of September 5, 2016
All three major US indices bounced back last week after two weeks of mixed performance. The Dow Jones Industrial Average and NASDAQ Composite were up 0.52% and 0.59%, respectively, while the S&P 500 came in at 0.50% for the week.
Broad international markets were also positive for the week. The MSCI All Country World Index ex-USA, which measures the performance of global equities minus our domestic markets, was up 0.32% last week. In this week's commentary we touch on the most recent employment picture in the US, Chinese banks cleaning up their books and oil's volatile week. We conclude with the story of an interesting job opportunity for those with an affinity for hedgehogs and the ability to relocate to Britain.
The Bureau of Labor Statistics released the most recent jobs report and the news wasn't as good as analysts had expected. The US created 151,000 jobs but many were expecting a number closer to 180,000. August has historically been a difficult month for job creation. This marks the tenth time in the last 13 years that the month has missed analyst’s expectation. What's more, the miss means the Federal Reserve is likely to push the next interest rate increase until December rather than September in spite of what Janet Yellen had hinted to in her Jackson Hole speech just a week ago. While the miss is certainly disappointing for investors, the US did see two strong job growth numbers from June and July, indicating that the job market is not exactly contracting. Unemployment remained unchanged at 4.9% and those holding part-time jobs for economic reasons, another measure of the health of the job market, was steady at 9.7%.
Chinese Banks Writing Off Bad Loans
Some of China's largest banks, in an effort to clean up their books, have begun writing off bad loans as they attempt to position themselves for increased profitability in the future. According to the data, China's four largest banks wrote off a combined 130.3 billion yuan, or $19.5 billion, over the first six months of 2016. For context, that's 44% more over the same time period in 2015. While this move does improve the financial situation of Chinese banks on a forward-looking basis, the banks are likely to face an uphill battle over the near-term as interest rates have fallen and higher quality companies are turning to issuing equity or bonds rather than borrowing from banks.
Oil Glut Fears Reignite
Oil prices weakened last Wednesday on data released by the US Energy Information Administration that indicated crude stockpiles increased more than analysts had expected. According to the data, domestic crude stockpiles rose 4.5 million barrels over the previous week to hit a record high of 1.4 billion barrels. What's more, gasoline stockpiles only fell by 700,000 barrels, also missing predictions. As we have mentioned in some of our past commentaries, oil traders typically don't take oil's byproducts into consideration when making investments. Given that gasoline stockpiles are hovering around historic highs; traders are now starting to factor these other byproducts into their trades. Internationally, the Organization of the Petroleum Exporting Countries, or OPEC, is planning to meet in September to discuss low oil prices but investors aren't holding their breath as numerous talks have failed over the last 12 months.
Fun Story of the Week
Do you need a new job and are willing to move to England? Do you like hedgehogs? Then you just might consider applying for a senior hedgehog officer position. "What does a senior hedgehog officer actually do?", you may ask. Well, it's as simple as trying to make things better for hedgehogs, says Fay Vass, the chief executive of the 11,000-member British Hedgehog Society. The job may sound overly simplistic but there are serious issues plaguing the West-European hedgehog, Britain's national species. The hedgehog's natural habitat has been overdeveloped and homeowners are putting up fences, knocking down the hedges that provided the animal food and shelter. According to estimates, the hedgehog population has dropped between 3-4% annually and there believed to be less than one million left in Britain. While the current situation may seem dour for the spiky mammal, hedgehog officers have certainly made a difference, raising awareness and caring for injured, sick or abandoned hedgehogs.
Securities offered through Jacques Financial, LLC (JFLLC) a Broker-Dealer, Member FINRA and SIPC.Certain associates of Joseph W. Jacques, CPA, CFPTM are registered representatives of JFLLC. Joseph W. Jacques, CPA, CFPTM and JFLLC are affiliated. Investment advisory services are offered through Jacques Advisors, LLC an affiliate of JFLLC. Tax services are offered through Jacques & Associates Certified Public Accountants, LLC an affiliate of JFLLC.
This newsletter was written and prepared by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ALL COUNTRY WORLD INDEX EX USA
The MSCI All Country World Index ex USA captures the performance of securities within the MSCI All Country World Index except for equities within the USA. It is market cap-weighted and covers both developed and emerging markets.
Wall Street Journal, September 2016. http://www.wsj.com/articles/u-s-payroll-growth-slowed-in-august-jobless-rate-held-steady-1472819502
CNBC, September 2016. http://www.cnbc.com/2016/09/02/us-nonfarm-payrolls-august-2016.html
Wall Street Journal, August 2016. http://www.wsj.com/articles/oil-falls-on-renewed-production-glut-fears-1472640372
Wall Street Journal, August 2016. http://www.wsj.com/articles/chinese-banks-throwing-out-soured-lending-to-clean-up-balance-sheets-1472559952
Wall Street Journal, August 2016. http://www.wsj.com/articles/england-is-looking-for-a-few-good-senior-hedgehog-officers-1471444003