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What Does A Multi-Decade Low In This Measure Mean?

CAMS Weekly View – Week Ending 3/3/17

March 6, 2017


In the week ending February 25, the advance figure for seasonally adjusted initial claims was 223,000, a decrease of 19,000 from the previous week’s revised level. This is the lowest level for initial claims since March 31, 1973 when it was 222,000. –

In our previous Weekly View we addressed some items in the broad market that suggested caution was creeping into the landscape.  This past week we then saw a post State of the Union market response that was impressively powerful.  The following day many of the areas that launched higher retraced their powerful moves.

This type of price action can be looked at as failed breakout attempts, but to be fair, we need a little more time to label it as such.  Regardless, strong upward moves that are immediately retraced are typically looked at suspiciously in regards to their true strength.  An inability of a market to hold powerful breakouts is a sign of a tiring market.  Importantly, this is a potential sign, not a certainty.

Tax cuts, deregulation, and repatriation of foreign corporate profits at favorable tax rates have been center pieces of the market excitement post-election.  This was again reinvigorated in early February with the current Administration communicating these hallmarks were coming front-and-center as they seemed to get lost in the Immigration policy actions.

All told, post-election to current day, we have seen a remarkable reaction to the prospect of these policy offerings.  With this said, and realizing it will be some months before markets know concretely what actual tax policies will be, it would not be surprising to see markets take a rest or even retrace some of their rapid moves from their early November launch points.  All this would be normal behavior as markets typically – even in strong upward trending markets – ebb and flow on even the most powerful of trends.


The chart above speaks to our headline excerpt which was extracted from the Weekly Unemployment data released this past Thursday from the Department of Labor.  The level of these Initial Claims gives information as to the general health of the Employment market.  The most recent release reflects a level of Initial Claims that we haven’t seen in decades.

The chart gives a visual of this data going back to 1967 for broad perspective.  Focusing on the orange line in the upper pane we see how these Initial Claims are cascading lower.  In addition, in the lower pane we see these Initial Claims as a Percentage of the Civilian only Labor Force continues to plumb lower lows dating back to 1967.  This all suggests the Employment Market is healthy.

With the on-going employment strength depicted in part by these Claims above, as well as other signs of strength in the economy all told offer an increased likelihood of a rate hike from the Federal Reserve soon.  FED Chair Janet Yellen pointed to this on Friday which was not a surprise in light of recent strong economic releases.

This offers a potential view behind some caution creeping into the market landscape of late.  With the on-going strengthening economic backdrop leading to expected rate hike(s) becoming more certain, in conjunction with it being some months before markets know what actual tax policy will be is perhaps some reasoning for caution within markets after their tremendous upward launch post-election.  We continue to monitor various nuances as we watch with vigilance for any evidence that the stock market in particular wants to pause or even retrace some of its post-election move.

I wish you well…


Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio


H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP).  This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”.  A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.

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