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Oct 1, 2019

September saw all three market indices post gains. Several factors have contributed to continued but slowing growth of the general economy. The labor market is strong and interest rates remain historically low. The percentage of the working-age population that is employed or looking for work was up in August, at 63.2%. The unemployment rate remained near a 50-year low, at 3.7%, and wages rose. Yet these signs of strength bring caveats that may deserve consideration given weaker-than-expected job-creation numbers.

Given demographic shifts, the current unemployment rate may stay low even as job growth slows. Strong month-on-month wage growth of 0.4% could reflect either a long-awaited rise in wages as competition for labor intensifies or it could reflect the shaking out of typically lower-paid contract and temporary workers from the workforce often seen in a slowing economy skewing wages upward.

The Federal Reserve’s balancing act with interest rates is likely to continue. Federal Reserve comments on additional rate cuts may be pushing some indices higher, but the paradox remains; an interest rate cut may be used as a tool if fundamental data weakens, not strengthens.

With all things considered we believe that speculation and betting on the near-term direction of any market is a fool’s errand. Instead, we believe having disciplined investment and risk management process, regardless of what the markets are doing, is the key to long-term investment success. Afterall, you can’t control the market’s performance, but you can control process and risk management.

As growth slows and trade protectionism persists, a defensive strategy of having cash for immediate needs and maintaining quality investments helps increase portfolio resilience.

The Dow, S&P 500 and the NASDAQ continue to be positive for the year at 15.39, 18.74, and 20.56 percent, respectively, with the 10-year Treasury yielding 1.69 percent.