Perspective:

• Fridays US employment data showed stronger than expected job growth in the "headline" numbers.
• Wage growth however, came in at a level below expectations:

Financial markets reacted significantly to the "headline" number:

• Volatility jumped (VIX up by 8.25%).
• The S&P 500 dropped by almost 1.5%. 

When Equity Markets Fall on Good Economic Data:

• It is because financial market participants react to what they think the "data dependant" Fed will consider rationale to begin raising interest rates.
• Higher interest rates will draw money to fixed income investments, possibly away from equities.
• More confident businesses will move money out of market investments and into investment in growth and development of their own companies.

S&P 500 over the last 20 years:

• A "secular bull market" until 2000.
• 2000 to 2013 a "secular bear market" with a top tested at close to 1600 in 2007.
• 2013 break above 1600 puts market into a "new" secular bull market (helped by record low interest rates).

S&P 500 since 2013:

• Higher highs and higher lows define the up-trend, which will continue as long as buying support arrives when sellers feel the need to take profits.
• A mild correction in October of 2014 was met by significant buying that drove the S&P 500 back to the new highs of February 2015.
• Price to Earnings levels at near 18, vs the long-term average of 14.5 make current levels look expensive.
• Forward earnings Q1 2015 are expected to decline on average by 4.6% (based on lower earnings for the energy sector).
• Interest rate increases by the Fed are expected to begin possibly as early as June, but more likely in September.
• There will be another correction as market participants try to gage the impact of interest rate increases and Q1 earnings.

Timing to be determined.

Expect the Unexpected!!

The views expressed are those of the author, Scott Tomenson, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.