Market Commentary 10/4/19

In another volatile week in the markets, the September jobs report helped soothe recession fears with a report that came in close to estimates. After a poor ISM reading (Institute of Supply Management) and service sector reading earlier in the week, some forecasters were fearing a terrible jobs number. We are happy to report that this not come to fruition. While we are certain that volatility will be a given, it is hard to argue that a recession is on the horizon considering the very low 3.500% unemployment rate.

The September jobs report was solid for a number of reasons. First, the market was primed to expect a major dud. Secondly, there were upward revisions from the past previous reports (i.e. there have been even more people working).  Thirdly, unemployment dipped to a 50-year low and the U-6 reading, which includes those working part-time and those “discouraged” workers who’ve stopped job-hunting, dipped to 6.9%. Finally, wage inflation is under control which puts a lid on bond yields.  

Housing has rebounded, and low-interest rates are boosting mortgage applications. Lower monthly housing payments free money up in consumers’ budgets, which can be spent on other goods and services, which helps the overall economy.

With the September jobs report behind us, and the 10-year Treasury yielding around 1.51%, we are recommending locking-in loans at this level.  While rates could go lower, it is hard to imagine a <1% 10-year Treasury yield for the moment, given the current generally healthy state of the U.S. economy.