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November 7, 2016 - Stocks Down but Long-Term View Up

| November 07, 2016
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We're in the middle of an interesting moment for the markets, where short-term volatility and uncertainty might lead you to believe that the economy is faltering. After all, the major stock indexes lost ground this week, with the S&P 500 losing 1.94%, the Dow dropping 1.50%, the NASDAQ dipping 2.77%, and the MSCI EAFE declining 1.59%.[1] On top of these losses, the S&P 500 posted its longest losing streak since 1980.[2]

Of course, we never like to see the markets go down. However, we believe that when you look beneath the surface, the economy is still doing far better than what this week's performance implies. Behind the losses and ongoing election exhaustion, we see a number of strong indicators that the economy is growing. This week, we learned that the trade deficit shrank[3], the service sector grew for the 81st consecutive month[4], and manufacturing continued its steady growth.[5]

On Friday, November 4, we also got to see new data on jobs and payrolls - the last significant economic report before Election Day.

What did the jobs report show us?

Unemployment Rate Dropped

The unemployment rate hit 4.9% - only 0.1% above the Federal Reserve's target unemployment rate.[6]

Economy Added 161,000 Jobs

While this job creation rate was below economists' predictions, we don't think it is cause for concern. The growth was matched by revised August and September reports that added another 44,000 jobs.[7]

Hourly Earnings Increased

Earnings increased by 0.4%, pushing them 2.8% higher than this time last year. We haven't seen an earnings increase this large since 2009.[8]

People Left Their Jobs at Higher Rates

Last month showed the highest number of people who voluntarily left their jobs since 2007.This statistic matters because it can show that people are more confident they'll be able to find new jobs.[9]

Our Takeaway

For years, this plow horse economy has been adding new jobs at a slow and steady pace. Now that we've almost reached the benchmark unemployment rate, people are finally starting to see their wages increase and new opportunities arise. Typically, better jobs mean more disposable income, which equals increased consumer spending - and economic growth.

The rest of 2016 might not be a smooth ride, as the election and potential interest rate increase remain on investors' minds. We hope you find comfort knowing that beneath this short-term volatility, we see growing economic strength.

ECONOMIC CALENDAR:

Monday: Gallup U.S. Consumer Spending Measure, Consumer Credit
Tuesday: U.S. Presidential Election
Wednesday: Wholesale Trade, EIA Petroleum Status Report
Thursday: Treasury Budget
Friday: Banks Closed but Markets Open, Consumer Sentiment

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices, and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

The S&P US Investment Grade Corporate Bond Index contains US- and foreign issued investment grade corporate bonds denominated in US dollars. The SPUSCIG launched on April 9, 2013. All information for an index prior to its launch date is back teased, based on the methodology that was in effect on the launch date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back tested returns.

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Google Finance is the source for any reference to the performance of an index between two specific periods.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

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  1. http://finance.yahoo.com
    http://finance.yahoo.com
    http://finance.yahoo.com
    https://www.msci.com
  2. http://www.bloomberg.com
  3. http://www.ftportfolios.com
  4. http://www.ftportfolios.com
  5. http://www.ftportfolios.com
  6. http://www.ftportfolios.com
  7. http://www.ftportfolios.com
  8. http://www.ftportfolios.com
  9. http://www.ftportfolios.com
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