While many are still digesting the most recent payrolls release, August job creation reported at 130,000, while the previous two months were revised downward – June revised downward by 15,000 from 193,000 to 178,000 and July down 5,000 from 164,000 to 159,000. Clearly the number of jobs being created is now fading as the 3 month average now stands at 154,000. Average hourly earnings for August rose 11 cents to $28.11. Note that job growth has been modest compared to 2018 reflected in the example – the three month average one year ago this quarter was 220,000 per month increase.
This week we will be looking at investors and their reaction to these 130,000 report as expectations were at 150,000. As mentioned in previous comments, the S&P 500 has been trading well, with 2,950 resistance breaching last week and with momentum could result in 3,100 or higher.
1. We feel that US equity rallies but we suggest that the key will be high volume – a high volume rally would be, in fact, a true rally.
2. US-China Trade Talks – at least for now, there will be calm and this calm between the Washington and Beijing could support equity.
3. The Nikkei 225 target is 21,800 with names that we favor – Murata, Sony, TDK, Subaru, Toyota, and others. I can send you the full list.
Any weak period in US economic growth would be an invitation for the Fed to act in the coming months – some feel a 50 bp cut is necessary given the state of affairs between – long-term battles – on the US-China trade front. We stick to our view that there will be no trade deal.