3 Things You Need to Know This Week | US Jobs, Trade Balance, Earnings Reports

Transcript

Ben Thistlethwaite:

Hello, and welcome to Three Things You Need to Know this week. This is our regular series, helping you cut through the financial headlines and focus on what really matters for markets. For more market insights, subscribe to our YouTube channel or visit FisherInvestments.com. And with that, here are three things you need to know this week.

First, US jobs. This week brings several US jobs updates. The biggest one comes Friday. The closely watched nonfarm-payrolls report and unemployment report from the US Bureau of Labor Statistics. This follows four straight months of positive but slowing job gains. In June, the economy added 57,000 jobs. That was just over half of the expected amount. It was also well below May's 129,000 jobs added. Friday's report will show whether the slowdown continued and whether unemployment stayed near 4.2%. Financial media has spent much of the year warning about a weaker labor market. They've generally pointed to geopolitical uncertainties, AI related layoffs and the broad challenges facing recent graduates. But lately, the conversation has started to shift a bit. Some companies are talking about increasing hiring again. They're citing both the limits of AI and the need for workers who can use new technologies effectively. That really fits into our broader view. Technology can eliminate some jobs, but it also creates new ones. And this often happens in ways that investors and analysts don't really predict ahead of time. The bigger point is this: Jobs data are backward looking. They tell us where the economy has been, not where markets are going next. On the other hand, stocks are forward looking. They move on the expectations for economic and earnings growth over the next 3-to-30 months.

Next, the US trade balance.

On Tuesday, we'll get June's US trade balance. In May, the trade deficit widened to $77.6 billion. That's up from $54.6 billion the prior month. The increase was largely driven by higher imports of consumer goods, including things like cell phones, crude oil and cars. Now, talk of a growing trade deficit can sound concerning, and it may seem like US businesses are losing out or that stocks could suffer as a result. But we actually see this differently. A trade deficit can be a sign of economic strength. When GDP is growing, consumers are spending and the US can actually afford to import more goods. That's not the same thing as a household deficit, where spending would be more than a household earns. Tariffs are also part of the discussion. And we view tariffs as an economic negative, but we don't think today's tariff levels are large enough to derail this bull market. Businesses have already shown that they can adapt. And the market reaction so far has been relatively muted.

Finally, second quarter earnings reports.

Now, we're in the middle of Q2 earnings season. And this week investors will get a closer look at Health Care, with reports from several notable pharmaceutical and biotech companies. So far, Health Care is the only sector reporting negative year-over-year earnings growth this year. Within the sector, biotech and pharma are the main weak spots. The other four healthcare industries have reported positive earnings growth. Now, importantly, the sector's weakness is really just concentrated in two companies. Excluding them, Health Care earnings would have actually been up 6.9% year-over-year instead of down 17.8%. Health Care's traditionally defensive. What this means is that it can lag when markets are rising strongly, but that does not mean investors should ignore it. We think some exposure to defensive sectors really supports a well-diversified portfolio, and Health Care may benefit from longer-term political, regulatory and even demographic tailwinds.

And that's it for this episode of Three Things You Need to Know this Week.

For more of our market views, check out This Week in Review. It's released every Friday or visit FisherInvestments.com. Thanks for watching and don't forget to "Like" and "Subscribe."