Market Analysis & September Jobs Report

*Written October 2nd

The last few weeks have been turbulent in the market with predictions coming out from fear and confusion. The possible government shutdown and fight over raising the debt ceiling contributed to a week-long selloff in the market causing the SPY to drop 5% – its biggest drop since July of this year.

But this has become typical for 2021 which is now characterized by wild market swings. Many traders now see these events as opportunities to “buy the dip” rather than a potential long term problem. These actions, in addition to the Fed’s help, have kept the markets climbing overall despite the country’s economic state following the pandemic and Delta variant.

Market Moving Events

Some keen traders have been taking advantage of trading opportunities coinciding with market moving events, but with only three known events remaining for 2021 its important to plan ahead.

One such event was the release of September’s Job report numbers. Before its release, the pre-market was up with the SPY, QQQ, and Futures all in the green. This indicates that most traders expected either a favorable outcome or predicted that the numbers wouldn’t effect the market notably. Its worth noting that the majority of analysts strongly believed the job report numbers would meet expectations which may explain the lack of apprehension that the market typically shows during these events.

Jobs Report

Based on August’s numbers, many were expecting that an extra 500,000 jobs would be added – marking a 100% increase from August. Contrary to these predictions, September’s jobs report came out well below expectations. With only 194 thousand jobs added, many would expect the market to react negatively to the news because it could signal that no meaningful recovery is taking place. Others might foresee a possible reduction in consumer spending as well. However, the market dip was not significant and even if it had been it could easily have bounced back based on expectations that the Fed would delay tapering.

Market Reaction

Had the number of jobs been higher than expectations it would have signaled a strong economic recovery and potentially increased spending as well. But this would have given the Fed an opportunity to start tapering earlier – something the Fed has been very apt to do. With this in mind, had September’s Jobs Report beat expectations it could have ironically triggered a selloff amid fears of earlier than expected tapering.

While some might be eager to buy the dip in this situation, it would be better to wait and see the full extent of the market’s reaction. The next jobs report is scheduled for November 6th and although September’s jobs report did not trigger such a reaction, there is a significant chance that the next will. Keeping this in mind, traders should price in these expectations and not expect a continuation of the market rally.

Based on the market’s behavior over the course of this year, it is also advisable to avoid going into potentially market moving events with short term holdings. Because market reactions are usually very volatile, it is better to stick with a clear trading plan.

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