Last week, solid job numbers were a case of good news is bad news for the markets, with the S&P 500 declining by (1.94%). Job creation and openings support economic growth but can prompt the Federal Reserve (Fed) to maintain higher rates for longer to fulfill its dual mandate of maximum employment and price stability. As long-term investors, we prefer a strong jobs market and cautious Fed over a weak jobs market and easy Fed policy. The latter is usually in response to a poor economy and can lead to a recession.
This week, the release of December inflation data, measured by the Consumer Price Index (CPI), should show little change over last month. A cooler December CPI could be the spark stocks need to bounce back. Conversely, a warm CPI report could add momentum to the 4.3% decline in the S&P 500 since December 6, 2024.
For a deeper dive into last week’s markets and economic events, please read the latest issue of Market Week.
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Regards,
David Bennett