Bright Like a Diamond

Last week saw a slate of employment data, and markets reacted poorly to a strong jobs print. We also saw labor force participation drop, as the unemployment rate pushed higher. Large Cap US equities beat out small caps, while silver saw a sharp selloff Friday. Into the week ahead, we move from choppy waters to what we believe will be relatively calm seas Monday and Tuesday. This is due to thin economic data prior to Wednesday’s FOMC meeting and CPI data.

Weekly Performance

Data Source: Factset®        Performance Period:      6/3/2024    6/7/2024

The economy saw mixed signals in the manufacturing sector last week. On Monday, the S&P Global US manufacturing PMI (Purchasing Manager’s Index) signaled marginal improvement, rising to 51.3 in May, from its April 50.0 mark. Meanwhile, ISM for manufacturing fell to 48.7% in May, from April’s 49.2%. The rest of the week saw further contradictory information, this time in terms of employment data. Tuesday job openings data showed a 0.3 million decrease from the month prior – a possible indication of cooling in the labor market. On Wednesday, the ADP employment report for April came in far lower than expected, with companies adding just 152,000 jobs compared to the 175,000 consensus forecast. Initial jobless claims on Thursday increased by 8,000 from the week prior, a four-week high likely due to the finalization of the school year and Memorial Day. However, Friday’s U.S. employment report far exceeded expectations with 272,000 new jobs in May compared to the forecasted 190,000 and 165,000 from April.

Looking at this week, we will see NFIB Small Business Optimism Index data, which is forecasted at 89.8 points, a slight increase from April’s 89.7. This will be followed by the publication of CPI (consumer price index) information and a FOMC interest rate decision on Wednesday. CPI, a measure of inflation, is anticipated to come in at 0.1% higher. The last CPI report revealed lower-than-anticipated price increases for April. Interest rates are unlikely to be cut in June, but could come later this year. Thursday will bring the PPI (producer price index), which measures the change in prices secured by producers each month. The index has a predicted change of 0.1% for May, following a 0.5% increase in April. Good data, this week, could create a bright June.

Not so bright, this past week, was a shift in the world of diamonds. It appears selling synthetic diamonds is no longer a winning strategy for De Beers, a global leader in the gem since 1888. Man-made gems have experienced a decrease in both quality and cost, and consumers are noticing the price difference between mined and manufactured. De Beers has battled low-cost synthetic diamond competitors in India and China, so it will be selling off its current man-made supply and returning its attention to selling natural to the wealthy. This pivot comes after Anglo American, 85% owner of De Beers, announced plans to sell the company, leaving it more vulnerable to variations in the market. It also follows synthetic diamonds dampening company earnings by $7 billion in the US, which led to its worst performance since 2001.

With calm seas on the outlook, for at least part of the week, we prepare to navigate FOMC policy, economic prints, and how Artificial Intelligence (AI) continues to change how business is done. As AI (and all the things it can do) becomes more prevalent in our lives, being cognizant of truth is even more important. Colossians 2:8 says, “See to it that no one takes you captive by philosophy and empty deceit, according to human tradition, according to the elemental spirits of the world, and not according to Christ.” Do not believe everything you see or hear. We are here to help you verify whatever you feel is trustworthy.

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

 Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights. Securities offered through American Portfolios Financial Services, Inc. of Holbrook, New York, 631.439.4600,(APFS), member FINRA, SIPC.  Faithward Advisors is not owned or operated by APFS. Faithward Advisors offers Investment Advisory services through Ambassador Advisors, an SEC Registered Investment Advisor. Dream More, Plan More, Do More is a registered trademark of Faithward Advisors, LLC, Reg. U.S. Pat. & Tm. Off. Any opinions expressed in this forum are not the opinion or view of Faithward Advisors or American Portfolios Financial Services, Inc. (APFS). They have not been reviewed by either firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.