September was a tough month for the markets as inflation stayed persistently high. The Fed increased their forecast for interest rates beyond what was previously expected. This upset both the bond and stock markets. The good news is that the job opening data that came out early in October showed a decrease in the number of available jobs to just over 10 million. That’s a drop of about 1 million or a total of 2 million from the high. Unfortunately we need that number to be 7 million or lower so we’re still a ways away from that. The markets reacted poorly to a decrease in the unemployment rate from 3.7% to 3.5%. This is due to the fact that the Fed says they need unemployment to get above 4% for their targets to be reached. In our opinion, watching this data point is like putting the cart before the horse. There are over 10 million open jobs. Why would unemployment go up? Even at 7 million unfilled jobs, we had 3.5% unemployment. For that number to come down, we need a few more million jobs to disappear. Therefore the key information we will be watching are the job opening data.
While the market was down last month, it didn’t significantly pass the June lows. We will continue to make small buys in the market if it continues to fall, but so far it has found support at around the current level. If over the next few months, we lose another few million jobs, the market could very well turn around and make a significant comeback as that would signal a reason for the Fed to be less aggressive with their rate hikes.
As always, if you have specific questions or concerns please don’t hesitate to reach out to us.