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Jobs down, bonds up

We had truly bad job numbers this week. The rate of new jobs created came in at 142,000, way below expectations. It is true that the BEA often revises these numbers up but that tends to be in an upswing. We are not in an upswing. This is what the chart looks like: Total Nonfarm Payrolls Chart

See the pattern? Two or three months of outlying number followed by reversal. In this recovery, new jobs have averaged 186,000 a month. Which sounds OK until you compare it to the 1980s recovery of 245,000 and the 1990s of 225,000…and that was when the labor market was 25% smaller.

Market Reaction

The yield on 10-year Treasuries dropped by around 20bp to 1.92%. It was this low back in January when the economy was in winter’s grip and then back to April 2013’s “taper tantrum” when a large “risk off” trade pushed rates down. Stocks rallied on the expectation that the Fed will delay any rate hike. Possibly into the New Year.

The Quarter End Effect

The third quarter was the worst for the S&P 500 since 2011, down around 6%. We are now looking at negative performance for the year to date, the first annual correction we have had since 2008. Fixed income investors did better in the same period, yet again proving diversification’s benefits.

Bottom Line: Sentiment is pretty rough right now and misery loves company. The upcoming earnings season will show sales slowdowns. These are volatile markets that test investors’ patience. It’s vital you stick with your investment plan.

--Brouwer & Janachowski, LLC

Please note that the discussion of the investments and investment strategy of Brouwer & Janachowski, LLC (“Advisor”) (including Advisor’s research and investment process) represent the investments and investment strategy of Advisor at the date of this commentary, and are subject to change without notice. Advisor cannot assure that the type of investments mentioned in this commentary will outperform any other investment strategy in the future, nor can it guarantee that such investments will present the best or an attractive risk-adjusted investment in the future.

Advisor cannot guarantee the accuracy or completeness of any statements or numerical data in this commentary. Past performance is no indication of future results.