Data continues to come in relatively strong with last week’s employment report offering mostly good news.


The January data continued to post positive momentum, supporting the bullish case for stocks. Friday’s January employment report was not an exception.

Nonfarm payrolls rose 227,000 and beat most economist’s expectations. This is higher than the 180,000-200,000 range we’ve become accustomed to see over the past several quarters. The unemployment rate ticked up to 4.8%, but remains near what many consider “full employment.”

A closer look at private jobs reveals still healthy year-over-year growth. This measure, which ignores government jobs, shows a 1.8% increase year-over-year. We tend to look at 1% as our “stall speed” given the tendency of the economy to perform poorly once growth dips below that level. While the growth rate is down from 2.4% a year ago, today’s 1.8% rate is still comfortably above this “stall speed.”


One last area to consider is wages. Consumer demand continues to be relatively steady, but is dependent upon wages. Personal consumption is accelerating toward a 4.5-5% range, while implied income growth from the employment report suggests moderation. Typically, the implied growth from the employment report leads the actual personal consumption data by a few months. This is worth watching as the year progresses as it implies slower growth ahead.

Overall, the employment report was a solid one. It reinforces the slow-and-steady growth dynamic we are seeing across a broader set of indicators. It also contributes to a body of evidence that is mostly equity market friendly.


FactSet estimates S&P 500 earnings for the fourth quarter is tracking toward 4.6% growth. Expected S&P 500 operating earnings now stands near $133.54 over the next 12-months, according to FactSet’s analyst survey. At this Level, the S&P 500 trades at 17.1x earnings or 19% above the 10-year average multiple.




Date Report Period Survey Prior
Monday, Feb 6: Labor Market Conditions Index Jan -0.3
Tuesday, Feb 7: International Trade Balance Dec -$45.2 B
JOLTS Dec 5.522 M
Wednesday, Feb 8: Crude Oil Inventories (barrels) Feb 3 6.5 M
Gasoline (barrels) Feb 3 3.9 M
Distillates (barrels) Feb 3 1.6 M
Thursday, Feb 9: Weekly Jobless Claims Feb 4 246 K
Friday, Feb 10: Import Prices M/M Jan 0.4%
Export Prices M/M Jan 0.3%
Import Prices Y/Y Jan 1.8%
Export Prices Y/Y Jan 1.1%
Consumer Sentiment (Preliminary) Feb 98.5
Treasury Budget Jan -$27.5 B
Source: Bloomberg



Based on shorter-term expectations, the “tactical” allocation within portfolios is underweight bonds / overweight stocks.



Kevin Caron, CFA, Portfolio Manager

Chad Morganlander, Portfolio Manager

Matthew Battipaglia, Analyst

Suzanne Ashley, Junior Analyst

(973) 549-4052




WCA Fundamental Conditions Barometer Description: We regularly assess changes in fundamental conditions to help guide near-term asset allocation decisions. The analysis incorporates approximately 30 forward-looking indicators in categories ranging from Credit and Capital Markets to U.S. Economic Conditions and Foreign Conditions. From each category of data, we create three diffusion-style sub-indices that measure the trends in the underlying data. Sustained improvement that is spread across a wide variety of observations will produce index readings above 50 (potentially favoring stocks), while readings below 50 would indicate potential deterioration (potentially favoring bonds). The WCA Fundamental Conditions Index combines the three underlying categories into a single summary measure. This measure can be thought of as a “barometer” for changes in fundamental conditions.

The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecasted in this report will be realized or achieved. Employees of Stifel, Nicolaus & Company, Incorporated or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed within. Past performance is no guarantee of future results. Indices are unmanaged, and you cannot invest directly in an index.

Asset allocation and diversification do not ensure a profit and may not protect against loss. There are special considerations associated with international investing, including the risk of currency fluctuations and political and economic events. Investing in emerging markets may involve greater risk and volatility than investing in more developed countries. Due to their narrow focus, sector-based investments typically exhibit greater volatility. Small company stocks are typically more volatile and carry additional risks, since smaller companies generally are not as well established as larger companies. Property values can fall due to environmental, economic, or other reasons, and changes in interest rates can negatively impact the performance of real estate companies. When investing in bonds, it is important to note that as interest rates rise, bond prices will fall. High-yield bonds have greater credit risk than higher-quality bonds. The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. The use of leverage can lead to large losses as well as gains.

All investments involve risk, including loss of principal, and there is no guarantee that investment objectives will be met. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager. Equity investments are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors to varying degrees. Fixed Income investments are subject to market, market liquidity, issuer, investment style, interest rate, credit quality, and call risks, among other factors to varying degrees.

This commentary often expresses opinions about the direction of market, investment sector and other trends. The opinions should not be considered predictions of future results. The information contained in this report is based on sources believed to be reliable, but is not guaranteed and not necessarily complete.

Washington Crossing Advisors LLC is a wholly owned subsidiary and affiliated SEC Registered Investment Adviser of Stifel Financial Corp (NYSE: SF).