10|13|2021

Stagflation | October 8, 2021

AUTHOR: Jason J. Roque, MS, CFP®, APMA®, AWMA®
TITLE:       Investment Adviser Rep – CCO
TAGS:   S&P 500, Oil, Inflation, Jobs, COVID

Stagflation was all over the news this week. What could job data mean for future inflation?

Monday

Markets tumbled to open the week. This was driven by inflationary fears as oil prices climb. Additionally, with stimulus wearing off, 2022 should see slower growth than 2021. This ultimately leads to fears of a stagflation environment.

Tuesday

In a rare occurrence, markets bounced the day after a pull back. They regained a large chunk of the losses from the prior day. This was largely a trade on overblown stagflation expectations as services outperformed.

Wednesday

Markets opened lower as promising employment data signals the Federal Reserve Bank (FRB) is more likely to begin tapering. Late in the day a debt ceiling deal was offered by one side of the aisle which buoyed investor sentiment. The deal is short in nature but does provide an additional 1.5 months to come to a longer-term deal. This was enough to lift markets into the close.

Thursday

The S&P 500 rose 0.35% on Thursday, however, it was higher early and faded throughout the day. Initial jobless claims fell more than expected, which contributed to gains. Otherwise, it was likely a continuation of the prior days enthusiasm for a debt ceiling deal.

Friday

Markets found themselves marginally lower on Friday as the monthly jobs report failed to impress. Nonfarm payrolls rose by 194K when 366K was expected. Potentially more concerning is the 61.6% participation rate in comparison to 61.7% last month. That might not sound like much of a change, but that means there were 170,000 less people looking for work.

Conclusion

The October jobs report will be an important measure of the job markets health. This would represent the first full month after elevated unemployment benefits fall off. Look for the first Friday of November to carry significant meaning. A good job report could signal better than expected future spending, but tamer supply side inflation. A weak report could signal continued pressures on supply side inflation and low growth looking ahead.

~ Your Future… Our Services… Together! ~

Your interest in our articles helps us reach more people.  To show your appreciation for this post, please “like” the article on one of the links below:

Facebook | Twitter | LinkedIn

FOR MORE INFORMATION:

If you would like to receive this weekly article and other timely information follow us, here.

Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.