July Employment Report Preview
Heading into Friday’s Non-Farm Payrolls (NFP) report for July, economists are expecting an increase in payrolls of 192K, which would be a decline from June’s solid reading of 213K. In the private sector, economists are expecting an increase of 190K. The unemployment rate is expected to tick down to 3.9% after unexpectedly ticking up to 4.0% last month. Last month’s jump to 4% was taken as a signal to economists that workers were entering the workforce, so this will be an added area of focus again. Any increase in the unemployment rate without a surprisingly weak headline number will indicate a continuation of that trend and should help to keep wages from rising too fast.
Ahead of the report, we just published our eleven-page preview of the July jobs report. This report contains a ton of analysis related to how the equity market has historically reacted to the monthly jobs report, as well as how secondary employment-related indicators we track looked in July. We also include a breakdown of how the initial reading for July typically comes in relative to expectations and how that ranks versus other months.
One topic we cover in each month’s report is the S&P 500 stocks that do best and worst from the open to close on the day of the employment report based on whether or not the report comes in stronger or weaker than expected. In other words, which stocks should you buy, and which should you avoid? The table below highlights the best-performing stocks in the S&P 500 from the open to close on days when the Non-Farm Payrolls report has been better than expected over the last two years.
Of the 25 top performing stocks on days when the NFP beats expectations, seven sectors are represented, and Consumer Discretionary leads the way with nine. Vornado (VNO) has been the best performing stock with an average open to close gain of 2.54%. VNO is followed by nine other stocks that have been up 1%+. In terms of consistency, Urban Outfitters (URBN), CH Robinson (CHRW), and Michael Kors (KORS) have all been positive 90% of the time.
For anyone with more than a passing interest in how equities are impacted by economic data, this report is a must-read. To see the report, sign up for a monthly Bespoke Premium membership now!
B.I.G. Tips – August 2018 Seasonality
The chart below highlights the growth of $100 invested in the S&P 500 by month starting 50 years ago.
Had you only owned the S&P 500 during the month of August over the last 50 years, your $100 would now be $99 (for a decline of 1%). That’s not very good over a 50-year period! Historically, December has been the strongest month using this strategy, while the weakest month has been September, where $100 would now be worth just $70. Unfortunately, we have the two weakest months on the calendar coming up now that July is ending.
At the start of each month, we publish an in-depth report that analyzes seasonality trends for the US stock market, international markets, sectors, and individual stocks. To see which areas of the equity universe typically do the best and worst in the month of August, check out our just-published August Seasonality report.
This one is a must-read. To see it, sign up for a Bespoke Premium membership now!
B.I.G. Tips – Fed Days August 2018
There have been four Fed Days so far this year (1/31, 3/21, 5/2, 6/13), and the Fed held the Fed Funds Rate steady on two of them (1/31 and 5/2) and hiked on two (3/21 and 6/13).
The Fed Funds Rate currently stands at 1.75%-2.00% (roughly 1.91% effective), and as shown below, the odds that the Fed makes no change with tomorrow’s policy release stand at roughly 98%. Earlier this year, odds for this outcome (driven mostly by lower odds of a June hike) fell as low as 68%, driven by concerns over Italian debt selling off, but that was temporary.
Ahead of every Fed Day, we publish a report that looks at the odds of future Fed rate hikes (or cuts), and we also analyze how the US stock market typically performs in response to Fed policy changes. We’ve just published our newest report ahead of tomorrow’s policy announcement.
This one is a must-read. To see it, sign up for a Bespoke Premium membership now!