August tends to be a month that can provide uncertainty and, in some cases, frequent disappointing economic reports. One area of the economy that seems to slip during August is hiring. For ten straight years, the actual jobs data for the month of August has come in light of forecasts. Why economists are so bullish on hiring when half the country is trying to find a place on the beach in late summer is perplexing.
The 150,000 non-farm payrolls figure released last Friday was well under the 180,000 consensus estimate, while the unemployment rate stayed at 4.9%. Once the headlines crossed the tape, both bonds and stocks rallied on the notion the Fed will not raise rates at the Sept. 21 FOMC meeting. In my view, 150,000 new jobs added to the economy isnā??t gangbusters, but it is still within the Fedā??s parameters to act on their intention to begin to normalize short-term interest rates.
There is always volatility within the employment reports. Last monthā??s strong 255,000 was revised higher to 275,000, implying the job market got a big pop with the lower number in August maybe not being such a disappointment as first thought. What is most important is that if the bond market sees a chance, it may move. The yield on the benchmark 10-year Treasury Note rose on Friday to close at 1.60% amid a growing number of market participants that see a determined Fed looking for reasons to get a rate hike in before the December meeting.
Itā??s too close to call and at the end of the day, it makes little difference in how the rest of the month will play out. Stocks are moving higher across the board led by a fresh bid for dividend-paying equities. In my flagship service Cash Machine, I recently added a closed-end fund that invests in infrastructure that both Hillary Clinton and Donald Trump are promising to spend hundreds of billions of dollars on.
Itā??s managed by one of the most respected firms on Wall Street, trades at a -13.3% discount to net asset value (NAV), pays a hefty 7.55% current yield with no return of capital and holds 182 companies in its portfolio that consists of transmission power companies, cell phone tower companies, railroads, engineering construction companies, pipeline operators and infrastructure industrial companies. Itā??s also up 15.52% year-to-date, or twice the return of the S&P 500.
Lots of presidential promises are going to be made in the next 60 days, but fixing aging roads, highways and bridges and adding high-speed trains, driverless car lanes, better water systems, sewage and disposal and power grids is where the spending is going to be targeted. Oneā??s portfolio should have a decent weighting in this macro trend because the amount of money that will find bipartisan backing will be huge, maybe a trillion dollars alone, and those companies that are in the path of this spending binge are going to see their stocks outperform.
Itā??s a wave that every investor should be on and these types of timely investments that also pay out terrific income can be found at Cash Machine. Just click the link here and get on board before the infrastructure spending train leaves the station.
In case you missed it, I encourage you to read my e-letter column from last week about how the FOMC’s waffling is making life difficult for investors.