The US economy, according to the Bureau of Labor Statistics, generated a dismal 38,000 new non-farm jobs in the month of May. Economists were expecting additions of 155,000 new jobs. As I wrote last week, I was expecting a disappointing report.
The market’s reaction was initially sharply to the downside but came clawing back right to the closing bell. By the time the weekend began for traders, the market closed flat to slightly red for the session. However, we managed to eke out a third consecutive weekly gain for the S&P 500 (SPX).
Given the weakness in the labor report, we can only conclude that the Federal Reserve Open Market Committee (FOMC) will not raise interest rates in June. It is possible that it could do so in July, but if not, so as not to influence the election, will then be on hold till December. FOMC Chairwoman Janet Yellen will likely cast more light on the subject today when she speaks in Philadelphia.
The market bias seems to have turned positive; though I am not seeing any relative traction in the growth oriented stocks. This means that dividend stocks are still most favored by stock investors and likely will be until after the election. Furthermore, the breakdown of the bond market will be further delayed as the credit cycle will expand in duration and size.
Recently, we sold out positions in Netflix (NFLX). While we booked some solid long term gains for NFLX, I am less enthusiastic about the company’s ability to produce outsize gains in the future. Large deferred assets which will have to be written down and declining membership growth in the US will be a drag on future growth. We used the proceeds to begin positions in Edwards Lifesciences (EW), a medical device company and a homebuilders, Pulte Group.(PHM).
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long EW & PHM — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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