Green Light for US Stocks – Now!

Last Updated: 7. November 2023By

Among the few economic data with real course relevance are the monthly US labor market data. The latest numbers were released on Friday. How have these turned out and what does this mean for your stocks?

US job growth significantly weaker in October US job growth slowed significantly in October, as the US Department of Labor reported on Friday. This created an additional 150,000 jobs in the private sector and in the government, while economists surveyed in advance expected 170,000. The data thus fell slightly below expectations.

In the previous month of September, we saw a now revised figure of 297,000 jobs, and in August 165,000. Thus, job growth in the USA has halved compared to the previous month.

However, the slowdown in job growth is likely partly due to the strikes by the United Auto Workers (UAW) union against the three major automakers in Detroit, which have depressed the number of employees in the manufacturing sector. This is a temporary effect.

Why this is good news for your stocks The figures seem to present the best of both worlds for the stock markets. On the one hand, the US labor market cools off sufficiently so that the US Federal Reserve does not have to raise interest rates further. On the other hand, it does not cool off so quickly that recession fears arise immediately. In addition, we see some relief in wage inflation.

For US wages rose 0.2 percent from the previous month to $34.00, which represents an annual increase of 4.1 percent. This increase was slightly lower than the expectations of 0.3 percent or 4.2 percent.

The probability of a rate hike by the US Federal Reserve in December further decreases with these data from 20 percent to now only about 10 percent.

One could also say: a last interest rate hike this year is off the table. And over the course of next year, markets are already expecting one or more rate cuts.

Green light for US stocks – now! This should bring the previously quite high bond yields of around 5 percent for 10-year US Treasury bonds back down. The high interest rate on the US bond market should be behind us.

This gives stocks the green light for the time being – as long as there are no clear signs of a downturn in the USA, which is currently not the case.

Together with the currently strong seasonal tailwind and the rising US corporate profits, this creates an extremely advantageous starting point for you if you are interested in US stocks.