The positive U.S. jobs report released Friday contributed to a strong week for global stocks and bonds. The S&P 500 soared 1.5%, the MSCI ACWI climbed 0.9%, and the Bloomberg BarCap Aggregate Bond Index rose 0.2%.
Key points for the week
- The U.S. added 213,000 new jobs in June.
- Wage increases remained manageable, and additional workers entered the labor force.
- The U.S. and China each placed 25% tariffs on $34 billion worth of goods.
The Labor Department’s monthly jobs report provides an early indication of economic strength and inflationary pressures, and the June report showed very positive signs. The economy added 213,000 nonfarm payroll jobs, and the unemployment rate inched higher to 4%. The rise in unemployment was caused by an increase in labor force participation, not job loss, so that was taken as a good sign. Given the robust labor market, wage gains were one point below expectations at 2.7%. The pace of wage growth appears manageable, which is significant because a jump in the average hourly earnings triggered February’s correction.
The U.S. versus China trade battle had been primarily based on rhetoric. But just after midnight Monday, rhetoric turned into action. The U.S. placed a 25% tariff on $34 billion worth of Chinese goods, and China retaliated by placing a 25% tariff on $34 billion worth of U.S. goods, such as soybeans and automobiles. The rhetoric continued as Trump threatened tariffs could reach as high as $500 billion, which is the total value of Chinese imports last year, and China accused Trump of starting the largest trade war in history.
If China reduces its imports from the U.S., it could hit a number of key U.S. industries and regions. The chart above shows the industries most vulnerable to Chinese tariffs.
The World Cup is a time when people around the world come together to watch amazing athletes play the world’s most popular sport. It’s also a time when viewers get to know flags of countries around the world. For one grandmother wearing a red, blue and white, star-draped shirt to celebrate Independence Day, the World Cup made her realize that festive shirt is the flag of Panama. She’s been wearing it for 25 years.
his newsletter was written and produced 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 views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
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 ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.