Blog : My Nostalgic Outlook

by Ed Zwirn on October 23rd, 2013

As tempting as it may be to look back on any portion of the recent past with nostalgia, the waning days of the summer of 2013 are a hard sell, at least from a market standpoint, with the Dow Jones Industrial average losing over 4.4% in August alone as investors fretted over a possible new war and a mixed pile of economic releases.

Nostalgic or not, investors are finding themselves taken back to that magical time with the release of delayed government reports like Tuesday's construction spending report, which showed a slightly better than expected 0.6% uptick for August, a slowdown from July's upwardly revised 1.4% rise.

An offering containing slightly newer information, the September jobs report, has proven to be a disappointment even in this disappointment-proof era. While the unemployment rate itself beat expectations by coming in at 7.2%, from August's 7.3%, only 148,000 new jobs were created in September, down from an upwardly revised 193,000 in July. Hourly earnings rose by a lower-than-expected 0.1%, down from 0.3%.

The stock market digested the jobs report quickly on Tuesday, giving it a thumbs up, if only because nobody expected any good news on the jobs front anyway and because it only serves to reinforce the perception - as if any reinforcement is needed - that any U.S. Federal Reserve action to taper its $85 billion monthly bond buying program is a long way off.

The Fed's Open Markets Committee is set to make its next policy announcement on Wednesday, following the release of the producer price index on Tuesday and the consumer price index on Wednesday, and the statement will be quickly scrutinized for any differences from the pervious statement. Based upon the reaction to the jobs report, there is a good chance for a stock upswing as the Fed governors revise their characterization of the economy and rate of growth, which has certainly slowed since the last Fed meeting.

The October jobs report, to come out on Nov. 8, is also expected to be a disaster, given the direct and indirect impacts of the government shutdown that month, meaning that it will not be until early December that we get a view of the employment situation unclouded by recent political headwinds.

By then, with another cycle of government shutdown and debt ceiling showdowns in the offing, we may in fact be looking back with nostalgia at the present period.