ABOVE EXPECTATIONS
In June, the U.S. added 206,000 jobs, slightly surpassing the expected 200,000, though less than May’s downwardly revised increase of 218,000, originally pegged at 272,000. Surprisingly, the unemployment rate climbed to 4.1%, the highest since October 2021, unsettling forecasts which had predicted it to hold at 4%. This is a contradictory signal for Federal Reserve officials as they deliberate their next steps for monetary policy. The labor force participation rate edged up to 62.6%, indicating more people are either working or actively looking for jobs. Notably, a broader measure of unemployment, which includes discouraged workers and part-time employees due to economic reasons, stayed unchanged at 7.4%. The job gains were largely fueled by a surge of 70,000 new government jobs, alongside 49,000 additions in the health care sector and 34,000 in social assistance. Wages also saw an increase, with average hourly earnings rising by 0.3% for the month and 3.9% over the past year, matching predictions. Despite job growth, the rise in the unemployment rate presents a complex picture, blending positive employment trends with underlying economic concerns.
FEARS CONTINUE
Bitcoin is experiencing its fourth consecutive decline as the concerns over potential mass sell-offs by government bodies, and the looming issue of Mt Gox. paying its creditors in Bitcoin – events that will likely to flood the market with a substantial supply of the crypto. Due to the concerns, there has also been reduction in investor money flowing into bitcoin ETFs since mid-June, which has subsequently decreased Bitcoin’s value by around 25% from its peak in March. In addition, earlier this morning, Bitcoin fell by up to 8.1%, reaching its lowest value since February below $54,300. However, it is worth noting that as of 8:00 AM CST is seems like the crypto has managed to recover a little bit as it is trading at above the $55,000 mark. Moreover, experts have stated that there is the need for more favorable monetary policy signals from the Federal Reserve to reinvigorate the crypto market.
EARNINGS AWAITED
The U.S. stock market has seen an impressive 16% rally in 2024, driven primarily by major tech companies like Nvidia due to the rise of AI technology. However, only a small portion of stocks have outperformed the S&P 500, showing a rather narrow rally. About 40% of the S&P 500 components are in the red this year, and the broader market has only risen about 4%. And with earnings releases just around the corner, many are looking forward to find out if profit growth in other sectors can catch up with the tech giants known as the Magnificent 7 (Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta Platforms, and Tesla). In addition, experts hope that improved earnings reports from a wider range of companies could drive a more inclusive market rally; they have stated that the S&P 500 trades at high valuations, but excluding the top 10 stocks, the average valuation is more reasonable.
ELECTION JITTERS SPIKE
The U.S. bond market is witnessing increased volatility as investors recalibrate their expectations ahead of the upcoming presidential election. Following a lackluster debate performance by President Joe Biden against Donald Trump, the 10-year Treasury yield surged to 4.34%. This rise reflects investors’ fears that a potential second term for Trump could bring higher inflation and increased government spending, leading to larger fiscal deficits and more substantial debt levels. Moreover, while Trump’s team asserts that his pro-growth policies will eventually reduce interest rates and deficits, market sentiment remains cautious – a sentiment that is dimming the outlook for long-term bonds as they are more sensitive to economic growth and inflation expectations.
SMART RETIREMENT MOVE
According to a Northwestern Mutual study, many retirees overlook tax implications until they begin withdrawing funds from pretax accounts, as only 3 in 10 Americans have a strategy for reducing taxes on their retirement savings. And as this could lead to costly surprises, experts are recommending the “bucket strategy” to minimize tax burdens as much as possible.For instance, Roth IRA conversions during this period can be beneficial, as they involve moving pretax IRA funds to a Roth IRA, incurring taxes upfront but avoiding taxes on future withdrawals. This can help retirees stay within the 22% or 24% tax brackets, rather than higher brackets once Social Security and required minimum distributions (RMDs) kick in. Moreover, it is worth remarking that recent legislation has shifted RMD requirements to begin at age 73, and they will move to age 75 by 2033.
