Jobs Report & Trade War Fears

President Trump’s announcement last night of an additional $100 billion in tariffs against the Chinese in retaliation for China levying tariffs on $50 billion of U.S. goods earlier this week drove stock market futures into negative territory overnight, with the Dow down 450 points at one point. Futures stayed in negative territory leading up to this morning’s labor market report for the month of March, with U.S. equity markets falling 1% prior to the report and trading around that level after the report was released. Although the 103,000 jobs created in May was less than expected and there was a net revision downward of 50,000 jobs for January and February, the economy has produced an average of over 200,000 jobs for the first quarter of the year. Furthermore, wage growth of 0.3% month-over-month and 2.7% year-over-year, was inline with expectations. The Unemployment Rate remains at 4.1% which is a 17-year low. We view this month’s job report as a solid report, as the economy continues to produce a large number of jobs to maintain a strong pace of growth, and wages are growing at a level that should not stoke inflation in the near future but still support consumer spending.

The biggest issue impacting markets this week has been the rhetoric between Washington and Beijing. The Chinese government held a press conference this morning and stated it would counter U.S. protectionism “at any cost”. This potentially sets up a standoff between the two countries, although it may lead to a negotiation between them. The impact of these headlines will continue to drive market volatility, investors should make sure they have the appropriate balance of stocks and bonds for their given tolerance level of risk. We will continue to use these periods of volatility as an opportunity to deploy cash across the portfolios we manage. Ultimately, we believe the positive economic fundamentals here in the U.S. and abroad as well as strong earnings growth will help the markets weather geopolitical headline risk as the year progresses.