U.S. Economy Strengthens But Global Risks Remain 10/3/14

Summary: 

  • Bill Gross exits PIMCO
  • September payrolls rose 248,000 and beat expectations
  • Global concerns create volatile week in the markets

Bill Gross leaves PIMCO:

Bill Gross, the founder and Chief Investment Officer (CIO) of Pacific Investment Management Company (PIMCO) resigned last Friday and announced that he will be joining Janus Capital Group.  PIMCO experienced large outflows from Bill’s biggest fund, the Total Return Fund, on Friday after this was announced.   While this is a setback, we believe that PIMCO has enough cash and their holdings are liquid enough to properly handle the outflows.

September adds 248,000 jobs:

Jobs growth accelerated in September as non-farm payrolls rose by 248,000.  This beat the average economist expectation of 220,000 jobs and shows that the economy is once again has some positive momentum and further shows that the weak job numbers for August were more of an outlier, rather than the direction of the economy.  The unemployment rate also ticked down and now stands at 5.9%, the lowest it has been since July of 2008.  These figures show the economy is heading in the right direction, but we are still not quite “out of the woods” yet.  Fed Chair Janet Yellen has said that the they will likely keep interest rates near zero for a “considerable time” after the Fed stops buying assets.

Protests in Hong Kong:

Chinese authorities announced in August that they would allow direct elections in 2017 for a new chief executive (equivalent of mayor in Hong Kong), but that voters will only be able to choose from a list of pre-approved candidates.  Protesters want a free choice when casting their ballots.  As a result, thousands of people are now protesting in Hong Kong in a pro-democracy civil disobedience movement.  The Chinese government does not seem to want to budge on their stance.  This hasn’t had major implications outside of China yet, but it is something to keep a close eye on.

Eurozone economic activity slowed in September due to Geopolitical concerns:

Eurozone manufacturing activity slowed last month more than initially estimated, with Germany joining France in contraction.  Concerning was data showing new weakness in German manufacturing which had been one of the few bright spots in the euro-zone’s bleak economic landscape.  The report will increase pressure on European Central Bank officials, who are scheduled to meet to determine more dramatic stimulus measures to boost demand and inflation.

Ebola Virus confirmed in U.S. Patient:

The first confirmed case of the Ebola Virus has been documented here in the U.S.  A patient in the Dallas area contracted the disease while in Liberia, but didn’t show any symptoms until he was back in the U.S.  The Center for Disease Control (CDC) has isolated the patient and is closely monitoring any people he may have had contact with over the last few weeks.  The CDC believes they have contained the virus and that there is little risk of it spreading.

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