Dear Family, Friends and Clients,

Recent market volatility has perplexed investors, with a backdrop of U.S. economic prosperity including historically-low unemployment, high consumer confidence, and upticks in wage growth contrasting with a U.S./China trade impasse and rising interest rates. 

As of this post, the S&P 500 SPX is trading at 2,473, down 15.5% off its 09/21/18 closing price of 2,930, and is edging closer to a bear market despite the recent snap-back 3% rally.  Has the strong economic data been fully baked into domestic equity prices?  If not, how much more potential improvement in the data is possible and how might the market react should we see softening results? 

A recent study shows the returns of the forward annualized price returns of the S&P 500 by unemployment rate since 1948 to see whether or not strong labor markets tend to yield strong domestic equity returns:
As shown above, when unemployment is under 4%, the average annualized forward price return for the S&P 500 has been 4.34%, which is the lowest return of all five unemployment rate brackets. 

Perhaps the best news has already been digested. Slightly higher interest rates and unemployment isn't always a bad thing.


Respectfully submitted,



Bill Ulivieri

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