This week, on Thursday, employment numbers came in lower than expected for November, but on Friday, the unemployment rate dropped and the labor participation rate rose. These mixed messages further muddled markets – stocks closed out the week with a decline – the Nasdaq down 1.9%, took the brunt of the selling again, while the S&P declined 0.9% and Dow was off by 0.2%  and also finished in the red. The S&P and Nasdaq had their second-straight losing week, off 1.2% and 2.6% respectively.

Hiring has slowed down, more are seeking work and there are plenty of jobs to be filled. Despite that backdrop, the unemployment rate has fallen to 4.2%, the lowest level since the pre-pandemic. Tack on the threat of the Omicron strain and uncertainty over the next move by the Fed, you have one confusing picture of the economy.

It is no wonder that volatility in the stock market spiked this week. What comes next?

Future Wealth’s View

As Fed Chair Jay Powell confessed in his last press conference – “It is time for some humility”. The Fed underestimated the impact of inflation and focused on unemployment to come down to levels before hinting at raising rates. On Friday, Jay Powell confessed that the rise in inflation is no longer transitory and could stay with us through 2022. But even as he talked about increasing the speed of the taper to stem further rise in inflation, the Friday report that the economy added only 210K jobs in November, well short of the 600K projected, threw a wrench into his plan. If there is a job that no one wants right now, it’s Jay Powell’s job. There is no precedent to the past year, no relevant economics books to read and no one uniquely qualified to consult. He simply has no one but his team to rely on.

In these times of extreme uncertainty, it is best for investors to also accept that we don’t know any better either. Which means not making rash decisions – buying or selling aggressively. 

Patience, as we often tell our children, still remains a virtue.