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Perspectives from Above the Noise -- Week of June 4th, 2018

| June 04, 2018
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More Americans at Work. Stocks broadly advanced last Friday, more than erasing a weekly loss, as May non-farm payrolls widely outpaced expectations and the unemployment rate fell from 3.9% to 3.8%, matching April 2000 at the lowest level since 1969. Moreover, revisions for March and April added 15,000 more jobs and average hourly wages rose 0.3%.

Equities Mostly Higher. For the week, the S&P 500 gained 0.54%, the Dow Industrials fell 0.48%, and the tech-heavy Nasdaq Composite advanced 1.65%. Small cap stocks posted their seventh consecutive weekly gain in the past eight weeks, as the Russell 2000 Index gained 1.32%.

Energy Companies Rebound. Energy companies gained the most last week (+2.49%) after falling over 4.5% the week prior. Energy rebounded despite a second week of lower oil prices (-3.05%), as gasoline prices held steady at a three-month high. Technology (+2.08%) and Real Estate (+1.68%) also outperformed, while Financials (-1.23%) and Telecom (-0.74%) led decliners.

Treasurys Rally Second Week. The U.S. Dollar Index slipped 0.10% last week, ending at 94.156, while Treasury prices rose, sending the yield on 10-year notes down 2.9 basis points at 2.903%. West Texas Intermediate oil fell 3.05% to end the week at $65.81/barrel.

What We’re Reading

Job Gains Top 12-Month Average -- Bureau of Labor Statistics

OPEC May Boost Production -- Reuters

China Warns U.S. on Tariffs -- UPI

Chart of the Week:  Jobs Gains Top 12-Month Average

The US economy added 223,000 jobs in May, well ahead of the consensus expectation of 188,000. The 12-month average for monthly jobs growth climbed higher to 197,000 and the unemployment rate dropped to an 18-year low of 3.8%. Several key labor market statistics including, the unemployment rate and initial jobless claims, are at levels that historically have been reached at the end of an economic cycle. Moreover, the U.S. economy has produced positive jobs growth for a record 92 consecutive months.

Despite strong jobs data, there is still slack left in the labor market, based on labor force participation data. Structural headwinds, including baby boomers leaving the labor force for retirement and a growing percentage of individuals attending college, have suppressed the labor force participation rate. However, the labor force participation rate for 25-54 year olds, which eliminates most individuals that are out of the labor force for retirement and education, is still marginally lower than the peak in the previous three economic cycles. We anticipate that economic growth will remain stable through the remainder of the year, removing additional slack from a labor market that has been growing steadily since 2010.

Some materials are chosen by the Cetera Investment Management team and summarized by Jason Vitucci who is not affiliated or registered with Cetera. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. Cetera Investment Management individuals who provide investment management services are not associated persons with any broker-dealer. International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.

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