The Jobs report released on Friday showed that the U.S. economy added a stronger than expected 372,000 jobs in June, and the unemployment rate held steady at a healthy 3.6%, giving the Fed no reason to deviate from its plan for aggressive rate hikes. Investors may have backed off a bit from overriding recession fears, as the strong jobs report and a recent sharp decline in prices for oil and other commodities allowed for a somewhat higher possibility that the U.S. economy could achieve a soft landing. It is now almost certain that the Fed will raise interest rates by another 75 basis points in the next meeting.
The question is does one good Jobs report put recession into the back burner? What if CPI data to be released next Wednesday shows a drop in inflation? Will the Fed then begin to ease back on interest rate hikes?
So many questions and so few answers.
Future Wealth’s View
Any asset you care to look at has the “R word” looming large: from copper to oil to fixed income. Whatever shape a recession takes—if one happens—it’s going to hurt. For some, it already feels like it’s here, with many consumers increasingly squeezed. Despite all the mixed signals, there are pundits on CNBC pontificating that retail investors have to capitulate to mark the end of the bear market or stocks have to get a lot cheaper or the VIX (Volatility Index) has to spike etc. The fact is that no one knows when the bear market is going to end. So don’t even try.
One thing we know for sure – stocks of companies with solid earnings, good cash flow, strong record of paying out dividends have all come down from the recent highs by double digits due to the across the board rout in the stock market. If you owned that company on Jan 1, 2022, there is simply no reason not to own them now and if you have cash sitting idly in the bank, the recommendation would be buy more of the stock of the same companies and stick with it, recession or not. Panic selling or just panicking looking at your portfolio every day is simply a sign of lack of research on those companies.
Investing in the stock market was never intended for the faint of heart.