This Week in Review | Record Highs, US Jobs, Yen Intervention

Transcript

Hello and welcome to This Week in Review.

This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. Now, let's review what happened this week.

First up, new record highs.

This week, for the first time since early June, the S&P 500 closed at a new all-time high, and global stocks measured by the MSCI World notched all-time highs as well. This move reflects a sharp rebound from the summer's market anxiety, where concerns over tech valuations, geopolitical tensions and higher oil prices weighed on investor sentiment. It's impossible to say exactly what drives short-term market moves, but many attributed this week's rise to markets shaking off AI earnings fears and reacting to easing oil prices. But, for investors, here's the bigger takeaway: New highs do not mean a market peak. Headlines often make it feel like stocks have gone too far, too fast. But bull markets routinely hit dozens, even hundreds, of record highs before they end. Historically, the most common thing to follow a record market high is simply more record highs. That doesn't mean stocks will move in a straight line from here. Short-term volatility is always possible, especially if expectations shift. But returning to record highs is a great reminder that stocks can climb the proverbial "wall of worry," even during uncertain times.

Next, July US employment data.

Investors got a fresh look at the labor market today. Non\farm payrolls fell by 23,000 in July, while the unemployment rate dropped to 4.1%. But how could payrolls and unemployment fall at the same time? That may seem counterintuitive at first, but it's due to some workers exiting the workforce due to retirements or other factors. This was evidenced by the labor force participation rate falling slightly to 61.4%. Unemployment statistics only count those unemployed who are looking for work, not those who retired or exited the workforce permanently. These mixed results highlight why investors should be cautious about drawing big conclusions from any single jobs report. Expectations for a Fed rate hike in September fell slightly on the release this morning, and many investors are wondering if this report will change how the Fed is viewing incoming economic data. In our view, that gives this single report too much weight. Employment data is a lagging indicator. Companies hire after demand shows up, not before. Filling open positions often takes weeks or months, meaning today's payroll figures largely reflect business decisions made weeks or months ago based on past, not future, economic conditions. Today's mixed data tell us the recent labor market picture is uneven. It does not tell us where the economy or markets are headed next. Remember, stocks are forward-looking. Furthermore, investors shouldn't assume a weaker jobs report automatically translates into a change of monetary policy. The Fed weighs a wide range of economic data. The key question isn't whether the jobs data beat or miss expectations by a few thousand, it's whether reality continues to evolve differently than investors broadly expect.

Finally, US-Japan yen intervention.

Japan's currency made headlines last week after the yen fell to its weakest level against the US dollar in roughly 40 years. In response, the US and Japan took the unusual step of jointly buying yen in the foreign exchange market. Why does this matter? For Japan, a weaker yen makes imported goods like energy and food more expensive. Because Japan relies heavily on imported fuel, the rise in global energy prices have made those costs painful. But the US has its own interests for stepping in. Japan is one of America's closest economic allies, and also one of the largest foreign holders of US Treasury Bonds. Coordinated action ensures Japan doesn't need to sell its US Treasury holdings to support the yen. In this coordinated action this week, the US sold some of its euro reserves to buy in and Japan utilized a special Federal Reserve lending facility so they wouldn't have to directly sell their US Treasury bonds. The goal wasn't to permanently change the value of the currency, but to restore confidence in the market by slowing what policymakers viewed as an overly rapid decline in the yen. For investors, it's important to distinguish between short-term policy actions and long-term market drivers. As we've noted in a recent MarketMinder article, while the yen is an important currency in international financial plumbing, it's not as much a major driver for US or Japanese stocks. Currencies remain driven by relative economic conditions, not just government actions alone.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series Three Things You Need to Know This Week, released every Monday. You can also visit FisherInvestments.com anytime for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit Like and Subscribe.