Last week, two concerns were top of mind for Wall Street: trade wars and inflation.
Fortunately, economic developments over the past few days alleviated these concerns. The announcement of steel and aluminum tariffs (or, taxes) from the Trump administration fueled the fear that a global trade war was on the horizon, especially since some of our major allies, including Canada, would have been impacted the most.
However, President Trump said Canada and Mexico would be exempt if a "new and fair NAFTA agreement is signed." NAFTA is the North American Free Trade Agreement. The European Union, Japan, and South Korea are also seeking an exemption from these tariffs.
The February jobs report released on Friday, March 9th indicated that inflation, the other major economic concern, was not as much of a problem as previously thought.
Previously, the January jobs report sparked the fear that inflation was on the verge of increasing so quickly that the Federal Reserve (Fed), our nation’s central bank, would be forced to aggressively raise short-term interest rates because average hourly earnings jumped 2.9% compared to the prior year. This was faster than economists expected and was the highest increase in eight years.
But the February jobs reports showed wage inflation was in check, as the annual increase for February was only 2.6% and the January data was revised lower to 2.8%.
The rest of the February jobs report was very strong, as the economy added a staggering 313,000 new jobs. This was the most jobs added in a year and a half. Job gains were widespread across industries with notable strength in construction, manufacturing, healthcare, retailers, and temporary help.
Further, the unemployment rate remained at a low 4.1% even as the monthly increase in the number of people able to work (the labor force) hit a 15-year high.
Economic releases this week that Wall Street will be paying attention to include data on inflation, housing, and retail sales.
An ongoing risk that has troubled many people for years is North Korea. It was announced last week that Kim Jong Un and President Trump will meet by May. It's reported that Kim wants to sign a peace treaty and establish diplomatic relations with the U.S. Time will tell.
The Simply Money Point
At Simply Money Advisors, we focus on the economic data, and it continues to point a U.S. economy growing around 2.5% to 3% this year, with corporate profit growth of 15%. Focusing too much on daily noise can lead to making crucial investment decisions based on emotions, which are notoriously irrational.