Monday Tee-Up: Key Inflation Data, CPI & PPI

Stocks fell on Friday morning after a better than expected July employment report raised prospects for continued aggressive Fed rate hikes. The Labor Department said that the U.S. economy added 528,000 nonfarm payroll jobs last month, up from a revised 398,000 in June and well above the consensus forecast of 250,000. The official unemployment rate ticked down to 3.5%, below the consensus of 3.6%. Wage growth was higher than expected. Average hourly earnings rose 0.5% from the prior month and 5.2% from the prior year, both above consensus estimates. The Dow fell 0.2%, the S&P 0.6%, and the Nasdaq 1.1%. Crude oil rose more than 2% to $90.50 per barrel, while gold fell $15 to $1792 per ounce.

Rapidly rising inflation in 2022 has knocked the stock market into a bear market. While growth strategies have suffered the most, value strategies also have declined. Even year-to-date bond prices are lower. Volatility, which has dropped from the highs of 2020, still has not returned to pre-COVID levels. Is it time for investors to cash in their chips? We note that investors exit the stock market at their own peril, as long-term returns from equities consistently have outpaced long-term returns from other asset classes, such as fixed income and cash. As well, those returns are from eras when the 10-year Treasury bond yield was much higher than the current 3.0% level. So what's a potential equity strategy for investors amid all the uncertainty? Argus believes that Min Vol is an all-weather strategy that is timely in any investing climate. Academic literature and, more to the point, returns history, indicate that Min Vol can deliver market-matching returns on an absolute basis and superior returns on a risk-adjusted basis over various time periods.