Skip to content
Weekly Insights
Volume 10, Edition 29 | August 30 – September 3, 2021

Sometimes Bad News is Good News for Investors

Doug Walters, CFA
The jobs report disappointed this week, but investors seemed okay with that. Any excuse for the Fed to remain in dovish mode is a plus for investors.

Contributed by Doug Walters, Max Berkovich

US stocks were up this week, but the best performance came from International, both Developed and Emerging. As we discussed a few weeks ago, diversification pays off (Why Own Emerging Markets?)! But the real highlight was the infamous “jobs” number, more formally known as non-farm payrolls.

Economic commentators love to focus on the jobs number released monthly by the Bureau of Labor Statistics. Why? Because the monthly change is so incredibly volatile and difficult to predict, that it is guaranteed to make headlines one way or another. Rarely does it come in as expected. This month was no different, with the 235K print well below the 750K expectation.

While the volatile monthly number is of limited meaning, there is a genuine story to tell when we take a few steps back. Rather than looking at the monthly change, if we look at the total number of employed, we see that at the worst of the pandemic (April 2020), about 22 million jobs had been lost. Since then, about 17 million jobs have been created, leaving a gap of over 5 million jobs. But the real gap is worse, as a healthy US economy should be creating at least 200K jobs per month. Factoring this in, the job market is about 8.8 million jobs short of where it should be (5M + 200K for 19 months).

This year, the average rate of job creation per month has been about 560K jobs. At that rate, it will take another three years to close the gap fully. So what does all of this mean for investors? The Federal Reserve is closely watching the unemployment data and inflation to help determine when they should pull back on stimulus. Investors are closely watching the Fed. At this point, any excuse for the Fed to extend stimulus has the potential to be viewed positively by investors. Perhaps we are at that point where bad (or at least slightly disappointing) news on the economic front is good news for investors.


The much anticipated August jobs report showed only 235K jobs were created last month, well below the 750K expectation.

Headlines This Week

Labor Lag

We received some insight into the state of the jobs market this week, and it was disappointing.

  • On Wednesday, the August ADP payrolls number came in lower than expected at 374K versus a consensus expectation of 610K.
  • On Friday, the more comprehensive non-farm payrolls report also fell short, with just 235K jobs created versus an expectation of 725K.
  • The market reaction was fairly sanguine for a couple of reasons. First, these data series are volatile, so reading too much into one month isn’t easy. Second, any weakness will likely mean (all else equal) that the Fed will be slower in pulling back stimulus.

Infrastructure Structure

Headlines regarding the second infrastructure bill, also called the human infrastructure bill or reconciliation bill, are starting to pick up again. Investors are balancing two aspects: the stimulus, which has the potential to continue to drive economic growth, and the taxes, which could impact corporate valuations and investor capital gains taxation.

  • On the tax front, it is being reported that corporate tax increases from 21% to 25 or 26%, capital gains increases for the wealthy from 23.8% to 31.8% (including the 3.8% medicare surtax), and higher taxes on international earnings are all on the table. These are lower rates than were initially discussed by the administration.
  • The structure or the bill will undoubtedly change before it is up for a vote. This week Senator Joe Manchin, a swing vote, pushed back on the $3.5T price tag in a WSJ op-ed, noting risks to debt and inflation.

Vaccination Rates

There is some good news regarding vaccinations in the midst of the rapid spread of the covid delta variant.

  • The Axios-Ipsos Coronovirus Index showed that vaccine hesitancy has dipped to its lowest level since the pandemic began. 20% state that they are “not very likely” or “not at all likely” to get the covid vaccine, down from around 30% just a few months ago.
  • Investors reacted positively to the report this week, boosting small-cap stocks that have the most to benefit from a covid recovery.

Jackson Hole Hangover

The rise in stock prices on Monday appeared to be a continuation of the positive response to the Fed Chair’s speech at Jackson Hole – which was just what stock investors ordered… a serving of no surprises with a side of dovishness.

The Week Ahead

Tapering Timelines

While the Fed is quiet next week, three other central banks will be in the headlines as the market keeps a close eye on their plans for tapering.

  • The Reserve Bank of Australia (RBA) will kick things off on Tuesday with their monthly policy meeting.
  • Last month, the RBA stuck to its tapering plans despite rising covid cases and expanding lockdowns.
  • While the decision is somewhat unpredictable, expectations are for the central bank to stay on course with a continued reduction in asset purchases.
  • The Bank of Canada (BoC) will meet Wednesday with a strong expectation that no changes to their ongoing tapering are due before the country’s federal elections later this month.
  • Lastly, the European Central Bank (ECB) will meet Thursday amid growing hawkish attitudes.
  • The market seems to think that the ECB has set the stage for an announcement that tapering could come as early as next week.

Domestic Data

Look out for a few US key metrics coming out next week.

  • On Wednesday, the Job Openings and Labor Turnover Survey (JOLTS) is out.
  • After hitting a record high last month with over 10 million job openings and a less than stellar non-farm payroll increase, expect to see another considerable number.
  • Also on Wednesday will be the Fed’s beige book which includes the current economic situation in each of the 12 Federal Reserve Districts.
  • Wrapping up the week on Friday will be the Producer Price Index (PPI) which is expected to continue climbing to 8.3% from last month’s record high of 7.8%, showing that inflationary pressures are sticking around for now.

Long Weekend

Monday is Labor Day marking the unofficial end of summer.

  • Hopefully, everyone can enjoy some time off over the three-day weekend!
  • Also, we wish a happy Jewish New Year to everyone on Tuesday.
  • The PGA season will wrap up this weekend for the golf fans out there as we patiently wait to see who will win the Tour Championship.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets of over $2 billion.



Strategic Financial Services, Inc. is registered with the Securities and Exchange Commission (SEC) as an Investment Advisor. The term “registered” signifies compliance with regulatory requirements and does not imply a certain level of skill or training.

The information provided on our website, including weekly market commentaries, financial planning articles, and other educational resources, is intended solely for educational purposes. It is designed to offer insights into financial planning and investment management, aiming to enhance understanding of financial concepts, strategies, and market trends. This content should not be interpreted as personalized investment advice or a recommendation for any specific strategy, financial planning approach, or investment product. Financial decisions are deeply personal and should be made considering the individual’s specific circumstances, goals, and risk tolerance. We recommend consulting with a professional financial advisor for personalized advice.

Please be aware that Strategic Financial Services, Inc. does not provide legal or tax advice. The content on this website is not intended to be used as such or as a substitute for legal or tax advice from a licensed professional. We advise seeking guidance from qualified legal and tax advisors regarding these matters.
Investment Risks and Portfolio Management.

The discussion of any investments on this website is for illustrative purposes only and provides no guarantee that the advisor will make any investments with the same or similar characteristics as those presented. The investments identified and described herein do not represent all the investments purchased or sold for client accounts. The selection of representative investments to discuss is based on various factors, including recent company news or earnings releases.

It should not be assumed that any investments discussed were or will be profitable. All investments involve risk, including the potential loss of principal. There is no assurance that investments mentioned will remain in client accounts at the time you view this information.

When index returns are mentioned on this site, they are provided as a general indicator of market conditions and are not representative of any client’s portfolio performance. Indices are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly. Therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

While index returns are used as a framework to report on general market conditions, they should not be construed as an indicator of future performance of any specific investment or portfolio. Discussion of index returns is intended to provide context and insight, not to suggest that clients will achieve similar results. Each client’s portfolio is managed according to their specific investment goals and financial situation.

The opinions and any forward-looking statements expressed in the articles and videos featured in our resource center are as of the date of publication. These statements are based on current laws, regulations, market conditions, and other relevant factors, including third-party data. Given the dynamic nature of financial and regulatory environments, as well as potential changes in market conditions or economic circumstances, the information provided may become outdated or may no longer be accurate.
We rely on third-party data to form our opinions and projections, which means that these are subject to the same uncertainties that affect all data-dependent analyses. As such, we advise readers to exercise caution and not rely solely on the statements made herein for making financial decisions. It is recommended that investors consult with a professional advisor who can help assess the relevance and accuracy of the content in light of the current economic climate and personal financial situation.

Our website contains links to third-party websites as a convenience to our users. Strategic Financial Services, Inc. does not control, endorse, or guarantee the content found on such sites. We are not responsible for the accuracy, legality, or content of the external site or for that of subsequent links.
Contact the external site for answers to questions regarding its content.
The inclusion of any link does not imply our endorsement of the site, nor does it imply any association with its operators. Use of any such linked website is at the user’s own risk.

Related Resources