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Strong Jobs Raises Concerns Over Interest Rates

Scott Poore, AIF, AWMA, APMA



Investors came to grips last week with the likelihood that future rate cuts may be delayed.

Last Friday's Jobs Report was higher for December (+256,000 jobs), which was better than expected. This caused futures on the next rate cut by the Fed to drop, with the expectation of a June cut the closest to a 50:50 prospect. Some forecasts are calling for the Fed's rate cutting cycle to be officially over. However, the underlying factors within the Labor Market point to potential trouble. Both "Job Quits" and "Job Hirings" in the JOLTs data released last week show a decline, meaning a potentially stagnant job market.


Meanwhile, though the Fed cut 3 times last year for a total of 100 basis points, interest rates have not proceeded lower - they have increased.

Since the first rate cut in December of last year, the yield on the 10yr Treasury is up more than 100 basis points. The average rate on a 30-year mortgage (as of this morning) is over 7% and closing in on the high in May of last year. As equities struggle with valuations and higher interest rates, diversification is the best investment strategy moving forward. This week's inflation data and Fed comments will determine how volatile trading will be this week.

 

Disclosures


The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.


Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.


Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.


Past Performance does not guarantee future results.

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