Stocks have soared this year, but job growth has been slow, hamstrung by modest economic growth. The election is close, and there is a lot of uncertainty about future economic policies. The long-term trends remain positive despite many short-term concerns that could trigger more volatile markets. As a result, it's a good time to consider bracing your portfolio by improving its diversification and making sure the mix of investments is aligned with your long-term financial goals.
Surprise Drop in Unemployment
The biggest surprise in the September jobs report was the 0.3 percent drop in the unemployment rate to 7.8 percent, its lowest level since January 2009. The unemployment rate had stayed above 8 percent for the past forty-three months, and few expected it would fall below 8 percent anytime soon.
In contrast, the number of jobs added in September was in line with expectations. Job growth was 114,000, close to the expected gain of 115,000, according to Bloomberg. Although September's increase was well below the 146,000 average monthly gain in 2012, revisions raised the reported job growth in July and August. Overall, the September report is another sign that the economy continues to grow modestly–not as fast as anyone would like but not slowing further.
Rising Stock Market
The S&P 500 has returned more than 16 percent this year and is nearing its record high, helped in part by the broad-based rally that began in June. In addition, 254 of those companies raised their dividends this year, according to Standard and Poor's. Despite economic and policy uncertainty, quality companies have delivered solid results to investors, and we believe they will continue to perform. Keep in mind, though, that past performance is not a guarantee of future results. While we never know which way stocks will move in the short term, normal volatility could return. We think modest economic growth and rising earnings can continue to drive stock prices higher over time.
Election and Policy Uncertainty
Many investors are concerned about the possible impacts of November's election, and you've likely heard some scary predictions. Remember that extreme predictions are rarely correct. In addition, election campaigns are full of proposals and claims that often never become law due to our system of checks and balances. Don't let the election frenzy distract you from a solid and appropriate long-term investment strategy.
Long-term investors have experienced many elections and market cycles. You can stay calm and invested through whatever challenges lie ahead if you own a well-diversified portfolio of quality investments and have rebalanced it when necessary to keep your mix of investments aligned with your goals.
Source: Investment Strategist Kate Warne. Article provided by Mishell C Szczepaniuk, Edward Jones Financial Advisor Photo: stock.xchng
