Week of September 6, 2021

Last week saw a mixed picture for the U.S. equity markets, with the S&P 500 and NASDAQ posting small gains, 0.62% and 1.57%, respectively.  The Dow finished the week to the downside, dropping 0.14%.

The most significant news last week was the unemployment report on Thursday, also giving Wall Street a mixed picture.  The report stated that 235,000 jobs were added when market analysts expected more than 700,000 new jobs.  This was a dramatic decline from the job growth over the previous two months which averaged nearly 900,000 newly created jobs.  At face value, the tepid job growth was clearly an indication that the economy is slowing, most recently as a result of the resurgence of the COVID and the delta variant.  In a “normal” economy, a weakening economy would not be welcomed by Wall Street.

But this is anything but a normal economy, and the weak jobs report was seen by many as a positive event for stocks going forward.  Why?  The Federal Reserve has indicated that they will begin to slow the purchase of securities in the open market – known as “tapering” - as a means of slowing the growth of the money supply in the economy.  A strong jobs report may have given the Fed reason to begin tapering, most likely by the end of September.  Market watchers see the weak jobs report as evidence that the economy is still in need of additional stimulus by the Federal Reserve.

September has historically been a volatile month in the U.S. equity markets, and this month is certainly no different.  Risks are no doubt elevated, but an accommodating Fed along with strong corporate earnings may paint a brighter picture for stock investors.