Good news for the US stock market, with job growth increasing in September. The list to bet on.
I am increasingly amazed by the resilience of the US economy. US stocks rose on Friday after fundamental employment data came in much stronger than economists had expected.
The Dow Jones Industrial Average rose 227 points or 0.5%. The S&P 500 rose 0.7% and the Nasdaq Composite rose more than 1%. The data is as of 4:00 p.m., as of this writing.
What happened?
Nonfarm Payrolls rose by 254,000 in September, far exceeding the 150,000 increase expected by surveys of economists.
The Unemployment Rate actually fell to 4.1%, despite expectations that it would hold steady at 4.2%.
Friday’s gains mark a turning point after rising geopolitical tensions in the Middle East led to a shaky start for stocks in October.
US economy is doing much better than expected
The jobs report seems to have brought investors’ attention back to the US economy much better than expected.
We remain in an environment where good economic news is good news for the stock market, as it raises the potential for a soft landing of the economy, without entering a recession.
With Friday’s gain, the major indices have recovered this week’s losses. The S&P 500 has been flat on the week, as have the Dow and Nasdaq.
The effects were also felt on the foreign exchange market, with the dollar strengthening against the euro at 1.0970, and on the government bond market, with the 10-year US bond sold off at full speed to a yield - on the upside - of 3.95%.
What implications for the Fed’s monetary policy?
Certainly, the strong employment report has reduced the idea of further massive cuts in interest rates. It is therefore unlikely that the Federal Reserve will reduce interest rates by another half a point next month.
In short, the recession risks are increasingly tending towards zero percent probability. But this does not exclude a pace of expansion of the Fed’s monetary policy by 25 basis points in November and December.
The three considerations to make
In short, there are three considerations to make:
- The rally for the American stock market can continue.
- The rally of bonds denominated in dollars could now be over (but for bonds in euros it’s a whole different story).
- For the foreign exchange market, the hypothesis of a super-dollar resurfaces, if today’s data is followed by other macroeconomic data that testify to the exceptional strength of the American economy.
The recommendation that comes from this is therefore to continue to have faith in the rally of US stocks, now that the employment data testify to investors that American consumers will continue to spend well in the coming months, simply because the unemployment rate remains anchored at a physiological level around 4%.
The recommendation remains the one already expressed in August of this year and summarized in the article I wrote on these pages "The most important stocks of the S&P 500 index are now cheaper. Here are which ones to buy".
Watch out for the Russell 2000: the ETFs I prefer
However, always from an operational point of view, the goodness of choosing also those products that invest directly in small and medium-sized American companies, whose representative index is the Russell 2000, is confirmed.
This index measures the performance of companies ranked from 1,001 to 3,000 by market capitalization in the USA, representing approximately 10% of the total market capitalization of the US stock market.
It is widely considered the main benchmark for small-cap stocks in the United States, offering a detailed view of the performance of this market segment.
I think it is appropriate to underline that it is the small and medium-sized American companies that benefit most from an ideal economic situation that sees, on the one hand, the benign Fed in monetary policy and on the other a resilient economy that continues to create jobs and is based on consumption and investments that are still growing at a sustained pace.
The ETFs that I like the most about the Russell 2000 are the following:
- Xtrackers Russell 2000 UCITS ETF 1C ISIN IE00BJZ2DD79 ticker XRS2 fund size 1250 million euros.
- SPDR Russell 2000 US Small Cap UCITS ETF ISIN IE00BJ38QD84 Ticker R2US fund size 2970 million euros.
Both funds have low management fees, around 0.30% per year and are large enough to offer good liquidity on the secondary market.
Cumulative performance from January 1st to today is +19% but there is still room to increase between now and the end of the year, especially if US macroeconomic data continues to be so positive in the coming months.
|DISCLAIMER
The information and considerations contained in this article must not be used as the sole or main support for making investment decisions. The reader retains full freedom in his or her investment choices and full responsibility in making them, since only he or she knows his or her risk appetite and time horizon. The information contained in the article is provided for information purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public to save.|
Original article published on Money.it Italy 2024-10-05 09:45:00. Original title: Wall Street: su quale indice Usa investire oggi
