After another generally limp employment report, the Trump economy is only worthy of a “B” grade, say many top minds on Wall Street.
And with that only so-so grade comes the prospect for a slow to no growth economy in 2020 due to a range of issues such as the trade tussle with China and weakening consumer sentiment. Investors will have a major decision to make soon on how to position their portfolios in 2020 for such a less than stellar macroeconomic backdrop.
September non-farm payrolls notched a 136,000 increase, the U.S. Labor Department said Friday, missing estimates (again) for a 145,000 gain. The unemployment rate ticked down to 3.5% from the 3.7% level seen in August. Average hourly earnings rose 2.9%, disappointing versus Wall Street estimates for 3.2% growth.
The Dow Jones Industrial Average popped 159 points as traders bet the lackluster month for jobs would push the Federal Reserve to cut interest rates again at its late October meeting.
“The Trump economy is a B economy right now,” said veteran economist and Dynamic Economic Strategy founder John Silvia on Yahoo Finance’s The First Trade. “The trade concerns is seeping into the employment numbers, production estimates and sales estimates and therefore the employment we will need will be lower as well.”
Silvia’s measured sentiment on the economy was echoed elsewhere moments after the jobs numbers hit the newswires.
Raymond James Chief Economist Scott Brown thinks the U.S. economy will only grow in the 1.5% to 2% range in 2020. “Things will be dicey for next year,” Brown told Yahoo Finance, adding that risks to the economy are to the downside.
Bank of America Merrill Lynch Chief U.S. economist Michelle Meyer is also in the subdued growth camp for next year, expecting about a 1.5% lift in GDP.
“We have a soft patch [in the economy] right around the turn of the year,” Meyer told Yahoo Finance. ”We have business investment continuing to have stalled out. Trade continues to be a drag and the consumer is slowing. Not a cutback or collapse in the consumer, but a slowdown for what has been a very strong pace of consumer spending earlier in the year.”
Belpointe Asset Management Chief strategist David Nelson thinks in this slow growth environment, consumer staples are likely to continue to be in favor.
But cheer those rate cuts and bid the high beta names, bulls. Bad economic news is good news until you get smashed in the face for sticking to that demented logic.