Average U.S. House Price Falls And Labor Market Shows Strength Despite Recession Speculation

TL;DR

• Non-farm payroll numbers increased by 263,000 jobs in November, well above the estimate of 200,000
• The average hourly wage went up as well, with the 0.6% gain double what had been expected
• Even so, this week we also saw the average house price in the U.S. fall for the third month in a row, and consumer confidence also fell back after a rally throughout summer
• Top weekly and monthly trades

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Major events that could affect your portfolio

Well, well, well what do we have here? Some very solid, some might even say downright impressive, economic data. Yes, amidst all the talk of recessions and layoffs, it seems the U.S. economy is doing its best impression of the ‘The Little Engine That Could’.

Where’s this coming from? Payroll and wage figures were announced today and the numbers have come as a bit of a surprise.

Non-farm payrolls increased by 263,000 in November, which was significantly higher than the 200,000 estimate. The unemployment rate was broadly in line with expectations but still remains low by historical standards at just 3.7%.

Wage growth also jumped, with average hourly earnings growing by 0.6%, which was double the projection for November. This takes the annual figure to 5.1% against the 4.6% expectation.

The strength in the labor market comes despite large scale layoffs in the tech industry, a Fed policy of aggressive rate hikes and continued speculation over an upcoming recession. These latest figures mean the Fed is going to have to think very hard about how they proceed at the next FOMC meeting in just under two weeks time.

While the economy continues to show surprising levels of resilience, inflation has also started to come down. With the Fed hoping to bring down inflation without completely crashing the economy, they’ll be hoping that slower hikes will enable them to tread this fine line over the next six to 12 months.

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But on the other hand…

Consumer confidence is down and the housing price index has slid further too.

The housing price index fell 0.8% in September, which marks the third consecutive month of negative growth. It comes at the same time that transaction numbers have plummeted, driven mainly due to the massive interest rates hike pushing new mortgage costs sky high.

Since the end of 2021, the average 30 year fixed mortgage has increased from around 3%, to hovering just below 7%.

At the same time, consumer confidence fell in November after gaining back some ground over the summer months. The University of Michigan consumer sentiment data fell back from 59.9 in October to 56.8 in November, though this is still markedly higher than the low of 50 in June.

This is the story right now. It’s not all good news out there, but it’s not all good either.

One day we get data that makes the economy look like it’s definitely about to tip into a recession, then a few days later we get some different statistics that make it seem like things aren’t actually that bad. I mean, don’t get us wrong, if we had to choose we’d rather the current status quo than an economy that’s in freefall.

But still, it makes planning for the future and structuring an investment portfolio a challenge. Do you prepare for the worst and go defensive, or do you swing for the fences and position your portfolio for growth?

This week’s top theme from Q.ai

There’s no way to know for sure what the markets have in store over the short term. We use AI to make predictions on what the likely performance is for all sorts of assets in the coming week, but we don’t expect it to be 100% correct 100% of the time.

The idea is simply to be right enough of the time to allow investors to make solid gains over the long term.

And besides, even the most impressive machine learning algorithm in the world can’t make the stock market go up. If the entire market goes down, picking the best stocks in the coming week just means they’ve gone down a bit less than the others.

That’s why Portfolio Protection can be so powerful. Downside protection is something that all the best hedge funds in the world do. They do it to provide security for their clients during volatile markets, allowing them to rebound from a higher base once markets turn.

At Q.ai, we use our sophisticated AI algorithms to do this. It means we can make a complex hedging strategy available for everyone, something that’s usually reserved for those high-flying hedge fund clients.

For investors with Portfolio Protection activated, our AI analyzes their portfolio every week and assesses the sensitivity to various forms of risk, such as interest rate risk, market volatility risk and oil risk. It then automatically implements hedging strategies to try to offset them.

It’s a powerful tool in a market who’s short term future is highly uncertain.

Top trade ideas

Here are some of the best ideas our AI systems are recommending for the next week and month.

One Gas Ince (OGS) – The natural gas utility company is one of our Top Buys for next week with an A rating in Low Momentum Volatility and a B in Quality Value. Revenue is up 38.5% over the past 12 months.

Applied Digital Corp (APLD) – The data center operator is our Top Short for next week with our AI rating them an F in Quality Value and a B in Low Momentum Volatility. Earnings per share was -$0.18 in the 12 months to the end of August.

Ideanomics (IDEX) – The commercial EV company is one of our Top Buys for next month with an A rating in Technicals and a B in Quality Value. Revenue has increased 13.9% in the 12 months to September 30.

Insulet Corp (PODD) – The medical device company is one of our Top Shorts for next month with our AI rating them an F in Low Momentum Volatility and Quality Value. The net income margin is just 1.5%.

Our AI’s Top ETF trade for the next month is to invest in South Korea, silver and U.S. natural gas and to short long term Treasuries and Pacific equities. Top Buys are the iShares MSCI South Korea ETF, the iShares Silver Trust and the U.S. Natural Gas Fund LP. Top Shorts are the iShares 20+ Year Treasury Bond ETF and the Vanguard FTSE Pacific ETF.

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