Average Annualized Return Per Closed Trade: 17.9%
Average Return Per Closed Trade: 15.5%
Average Holding Period: 320 days

This morning the Labor Department reported that the U.S. employment rate fell to 4.5 percent in March, the lowest it’s been since mid-2007, nearly ten years ago. However, behind the headline number the details weren’t so great. After two consecutive monthly gains above 200,000 to begin 2017, some cool down in hiring activity was expected, but the economy added only 98,000 non-farm jobs in March, well below the consensus expectation for an 180,000 gain. The shortfall is fully attributable to the private sector. The payroll figures for the prior two months were also revised downward by a combined 38,000.

This is fifth time since December 2013 that the monthly payrolls gain has been 100,000 or lower. In each of the previous four instances job gains bounced back in subsequent months, so the weak March showing may turn out to be statistical noise as well. On the other hand, hiring activity in the fourth quarter had slowed before the two-month surge above 200,000 in January and February, which some have attributed to higher business confidence in reaction to the president, so it is also possible that the last two months of quite strong jobs growth were the anomaly.

Furthermore, the tone of this month’s soft payrolls figures, which are taken by the Establishment Survey, differs greatly from the Household Survey figures, on which the unemployment rate is based. The latter saw employment rise by 472,000 and a decline in the number of unemployed Americans by 326,000, hence the fall in the jobless rate. The two surveys are separate so one cannot expect the two sets of figures to always match one another, but still, today’s apparent contradiction is bigger than most times and is difficult to make sense of.

This week also saw the release of the Fed Minutes from the last FOMC (Federal Open Market Committee) meeting. In mid-March the Fed raised the federal funds rate by a quarter-percentage point but gave off a dovish impression via its economic projections and policy statement language. The minutes, however, revealed that FOMC members debated beginning to reduce the Fed’s $4.5 trillion balance sheet this year. By selling bonds, the Fed would reduce money supply and all things equal push interest rates upward. This revelation counters the aforementioned dovish impression, creating some confusion in the markets.

At the end of the day, the Fed remains “data dependent” and economic data will mainly determine its course of action. Today’s soft March employment numbers alone likely won’t change the Fed’s plans to tighten more, but if April’s figures turn out to be weak too, then the U.S. central bank may have to lean toward more toward the dovish side again. Keep in mind that the Federal Reserve Bank of Atlanta’s GDPNow, a constantly updating GDP projection, has lowered its first-quarter GDP estimate to just 0.6 percent, the lowest in three years. When the FOMC met in March, the projection was 0.9 percent.

Politically, this week China’s paramount leader Xi Jinping met with President Trump, and perhaps coincidentally, the U.S. launched missile strikes in Syria against the Russia-backed Assad regime, adding more uncertainty to these uncertain times. It’s too early to assume that there will be significant economic implications from the action, but investors should keep a close eye on the situation. 

Lastly, because next Friday is a Good Friday, our next regular weekly issue will be published on Thursday, April 13.

We post a snapshot of our Brain Trust Profits Portfolio and the record of our closed trades below. For a more detailed table of current recommendations as well as information on closed trades, log into our website and click on the ‘Portfolio’ link.

Closed Trades: