Take a look this morning, and you’ll see that both the S&P 500 and the Dow Jones industrial average surged after the opening bell.
But pull back to the five day chart, and you’ll see that both of them have tanked enormously during the last week or so.
These wild swings are distressing to traders and investors. They’re creating quite a bit of confusion, instability and chaos.
Many analysts point to the political turmoil in American legislative houses. With the Democrats filing in to take the gavel, there’s quite a bit at stake. That includes international trade, where U.S./ China relations have been inflamed by a seemingly mindless trade war position on the American side.
Then there’s Federal Reserve moves on interest rates, which have a major impact on markets, and the idea that a recent rate hike could have been a poison pill for markets.
Now analysts are citing a brand-new jobs report today that shows unemployment staying under 3.7%, with 180,000 jobs added last month.
“The expectation of continued strength in hiring would contrast with the chaos of the stock market, a raging trade war, a partial shutdown of the government and the perception of growing risks for the economy,” writes Josh Boak today in Washington Post coverage of financial markets. “Payroll processor ADP said Thursday that private businesses added a robust 271,000 jobs in December, a sign that companies expect decent growth to continue despite the overhang of risks. And businesses are still searching for more workers. The employment site Glassdoor found that job postings have risen 17 percent in the past year to 6.7 million.”
In is it that traders are looking for any bright spot on the horizon in the American economy? Or does the jobs report actually provide fundamental positive indicators?
For those who remember the joblessness of the 2008 recession, a jobs report is tangible and concrete.
However, for traders who know how quickly U.S. markets swing, they’re already looking ahead of this report at what’s likely to happen next. The greater context involves U.S./China trade that’s worth billions and billions of dollars: if we make deals with the Chinese, the markets will come swinging back.
If these parties start to see more daylight between them, say, over the One China policy or soybeans or anything else, we’re likely to see huge cratering in the markets. Even Alan Greenspan has suggested that a correction is due, and the correction needs a stimulus – it may indeed be driven by trade tensions. Hold onto your hats and create some versatile positioning in a wild market this new year.