June Jobs Reports Boosts Stocks as Earnings Season Approaches!
“The world is a book and those who do not travel read only one page.”
— St. Augustine
In a globe of nearly 200 countries and eight billion people, there is plenty to see and explore outside of the place you call home. For many individuals, traveling is a high priority outside of their work life. Visiting a far away locale, with its unique history and different culture, offers a way to expand one’s horizons, both by meeting new people and seeing sites you might never have dreamed existed. Each person has their own memories about what they discovered when they went on vacation, and I am no different. Over the course of the last week, I traveled to Canada to experience the wonders of the metropolitan city that is Toronto. With a wide variety of different ethnic groups and plenty to see, especially in downtown Toronto, visitors are kept plenty busy. In the investment world, Bay Street is considered the Wall Street of Canada. In the equity market, Canada is historically known for its resource companies, especially in oil and gas, and mining. Over the last few decades, a large emphasis on growing its tech and entertainment industries has helped the Toronto Stock Exchange, known as the TSX, include a wider range of industry groups. Recently, that has extended to the cryptocurrency area. Given the election of Mr. Obrador in North American neighbor Mexico, Canada may start to look increasingly attractive, especially if Mr. Trump continues on his course of, shall we say, throwing sand in the face of his neighbors (in terms of trade).
In the markets this week, the June jobs report came in strong at 213 thousand jobs, handily beating the expectation of 195 thousand. While the jobs number came in hot, wages remain under control, although some industries are reporting shortages, especially those transportation related. The yield curve continues to flatten, so many investors believe the historical association that an impending recession is imminent. The thesis being an inverted yield curve, where the short end of the treasury curve (2 year) gets elevated above the longer duration period (ten year), has always accurately predicted a recession.
In the oil market, supply concerns about production in Venezuela, Libya, and Nigeria continues to bolster the price. Mr. Trump made waves with his comment about OPEC reducing the price of oil, and the Iranians were especially irked. The Saudis have indicated they will try and make up for whatever supply is disrupted by the US sanctions on Iran. I would also point out that a few weeks ago at the G-7 summit, Mr. Trump made a point of stating he thought it would be a good idea to include Russia at those kind of meetings. He was derisively questioned about that comment, but there is logic to it. Why? Putting aside the questionable ethical and aggressive conduct of ex KGB Putin, one should recognize that Russia is a huge oil and gas producer. In fact, Europe gets over half of its gas supplies from Big Red. China is also quite beholden to Mr. Putin in terms of energy supplies, more with oil than gas. As energy remains a strategic asset all over the globe, to not include such a large producer in high level meetings like the G-7 is poorly considered. Of course, politics is about putting on a good show for the cameras, and Mr. Trudeau, Mrs. Merkel, and the other members happily obliged.
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