 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Friday's Headlines 1. Markets Keep Rising Despite Economic Headwinds 2. August Jobs Report Shows Softening 3. Who is Driving the Market Higher? 4. Brexit Update 5. Looking Ahead to Next Week Markets Closed
Year-to-Date
 Markets Today
U.S. markets traded marginally higher to end the week, except for the Nasdaq, which gave up its gains towards the end of the session. It was a week punctuated with good news on the U.S. China trade negotiations, a devastating hurricane that ravaged the Bahamas and is flooding the Carolinas, and a weaker than expected jobs report. In general, though, sentiment is pushing stocks higher after a rough August. The Nasdaq, which climbed 1.8% on Thursday, closed at a 0.17% decrease.
Here's how major asset classes have performed so far this year:
It's peculiar that gold, typically considered to be a safety asset, is up 21% while the global stock market is up about 15%. They typically pull in opposite directions, but with interest rates so low around the world, investors are still buying stocks while they also hedge their positions with gold. And the inflows into gold, according to Bank of America, are at record highs.  August Jobs Report The August U.S. nonfarm payrolls report (The Jobs Report) came in weaker than expected as only 130,000 new jobs were added to payrolls, according to the Labor Dept. The forecasts were for gains of 164,000, which is below the monthly average for the past year. July's job increase was also revised lower to 159,000, pulling the 12-month average payroll change down to a still-solid 173,000.
That is still robust job growth, and combined with another rise in average hourly earnings of 3.2% year-over-year, the employment picture is still relatively strong, but softening. LPL Financial's month chart of job gains shows the trend line in yellow.  The Fed Sees No Signs of a Recession The Federal Reserve, meanwhile, sees no signs of an imminent recession. At a speech to an economic forum in Zurich, Fed Chair Jerome Powell said, "We're not forecasting or expecting a recession... The most likely outlook is still moderate growth, a strong labor market, and inflation continuing to move back up."
Powell credited the Fed for sustaining the economic expansion in the U.S. by pivoting towards lower interest rates at the beginning of the year, which has put the country in a more favorable economic position than it might otherwise be in.
He did say that trade uncertainty is weighing on business investment and confidence, but those issues should be "contained," and not be a "major impediment to growth." Those are important and carefully chosen words from Mr. Optimism. I'll have what he's having...
photo courtesy nypost.com  So... Who's Buying Right Now We know that individual investors have generally not been buying stocks for the better part of the past year. We are not talking about passive investing through your IRA or 401(k) plan. We are talking about the active buying and selling of stocks, ETFs, and mutual funds with discretionary income. Individual investors have been putting their money into money market funds, keeping it in cash or savings accounts, buying some gold, and spending a lot of it. The steep correction last fall scared a lot of folks out of the market, for justifiable reasons.
The volatility of the past two months has amplified their concerns. According to the American Association of Individual Investors AAII.org, optimism among individual investors about the short-term direction of the stock market rebounded but remains below 30% for the fifth consecutive week. The latest AAII Sentiment Survey also shows pessimism remaining at an unusually high level.  Institutional investors and corporations have been carrying the ball. Institutional investors have to put money to work on behalf of their clients, who are other institutions, governments, pensions, foundations, hedge funds endowments, and other deep-pocketed investors. That's their job.
Corporations buy equities for their own investment accounts, and they buy back their own shares when they think that is the best use of their cash. As we've written many times, stock buybacks hit a record in 2018 and are on pace to break that record in 2019.
Between the two, institutional investors and corporations, they have accounted for nearly all the big buying in equities, according to Bank of America. Not just this year, but for the past decade. When they make moves, they make big ones.  Brexit Latest It has been a rough week for British Prime Minster Boris Johnson. He lost his majority in Parliament, had several votes blocked in the House of Commons, and may have lost his wish to have the U.K. leave the EU via a hard Brexit on Oct. 31st, as planned. Here's the very latest, and what to look out for next week, per the BBC.
A bill designed to prevent a no-deal Brexit has been approved by the House of Lords and will pass into law. It will force the prime minister to ask the EU for the Brexit deadline to be extended beyond Oct. 31st if no deal is agreed by the U.K. and Brussels by Oct. 19th. Mr. Johnson wants an election to take place on Oct. 15, ahead of that date and ahead of the EU summit Oct. 17–18.
Mr. Johnson's decision to prorogue—suspend—Parliament next week ahead of a Queen's Speech on Oct. 14 is being challenged in the courts in Scotland and Northern Ireland. Scotland's Court of Session will give its judgment next week.
Looking Ahead to Next Week Here in the U.S., we'll get another round of key economic reports around industrial production and the housing market. Both will tell us if industrial and manufacturing sectors are continuing to contract, or if the trend over the past several months is abating. We would expect the housing market to be stronger than it has been given falling interest rates, which translate into lower mortgage rates. That hasn't manifested... at least not yet.
We'll also get producer prices and retail sales figures for August. Do companies have pricing power and did consumers keep spending last month?
On Thursday we will get a decision on interest rates from the EU. Mario Draghi's guidance has been to keep interest rates where they are, but to aggressively buy up government bonds (quantitative easing) and ease lending standards to banks. The EU has a lot of pain points right now, notably Germany, its biggest economy, but also Spain and Italy. (You already know about the U.K....) Draghi will step aside next month and hand the flaming baton to Christine Lagarde, who has been running the IMF.
We'll also get industrial production numbers out of China on Sunday. The latest manufacturing data out of China has been strong as of the past couple of weeks. Will that trend continue, or is it weakening, which might be part of what is leading their trade negotiators back to the table with the U.S. in October?
Interesting times... Have a great weekend.
chart courtesy www.koyfin.com  Shares of Symantec rose by almost 5% today following an announcement that two buyout firms, Permira and Advent, are each looking to acquire the software company. Perrigo's stock price increased by nearly 4% after its acquisition of U.S. over-the-counter rights for GSK's Prevacid heartburn medication.  Shares of Advanced Micro Devices fell by nearly 3% today. Monster Beverage's stock price also decreased by almost 3% following a report that the company's shares have fallen by 5.5% overall in the last month.  Word of the Day: A defined-contribution (DC) plan is retirement plan that's typically tax-deferred, like a 401(k) or a 403(b), in which employees contribute a fixed amount or a percentage of their paychecks to an account that is intended to fund their retirements. The sponsor company will at times match a portion of employee contributions as an added benefit. These plans place restrictions that control when and how each employee can withdraw from these accounts without penalties.  Today in Celebrations Sept. 6, 2019: Yes—this is another one of those made up holidays that we create to focus attention on things, but this thing is kind of important for U.S. investors.
A 401(k) plan is a tax-advantaged, defined-contribution retirement account offered by many employers to their employees. It is named after a section of the U.S. Internal Revenue Code. Workers can make contributions to their 401(k) accounts through automatic payroll withholding, and their employers can match some or all of those contributions. The investment earnings in a traditional 401(k) plan are not taxed until the employee withdraws that money, typically after retirement.
We have a special content experience on Investopedia that will teach you everything you need to know about the 401(k), and how to make it work for you. #StaySmart!
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Friday, September 6, 2019
A Bit Higher
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