Following some sluggishness over the preceding two months, the employment market seems to be back on track once again, delivering the largest job additions for the year in October. Record data has brightened the prospects of a rate hike in December. As a result, several interest-sensitive sectors in the equity markets have witnessed massive declines.
However, a surging dollar may force the Fed to hike rates at an extremely slow pace. Additionally, other factors may moderate the extent to which rates are hiked besides their impact. Though counterintuitive at first, picking real estate investment trusts (REITs) may continue to be a good idea in such an environment. Using the correct metrics may lead to excellent picks at bargain prices.
Job Additions to Spur Rate Hike
A record number of 271,000 jobs were added during the month of October. This is the highest figure recorded this year. Additionally, the increase in average hourly earnings on a yearly basis is the highest in six years. Moreover, unemployment has declined to 5%, the lowest experienced in seven and a half years.
Disappointing job additions and the sluggish pace of wage growth had stayed the Fed’s hand in August and September. In October, Fed officials had hinted at the possibility of a rate hike in December. This jobs report may be just the kind of impetus the central bank was looking for.
Dollar Bull Run to End?
However, a surging dollar may have a significant impact on the Fed’s decisions. Following the release of October’s jobs data, the dollar has risen above its highest level recorded for the year. At one point, the Bloomberg Dollar Spot Index climbed to its highest level recorded in more than a decade. On Monday, the greenback increased 0.2% to 123.37 yen in Tokyo.
Some market watchers believe that this spike could end the dollar’s Bull Run. This is because it could lead to statements from Fed officials that such a trend could curb the degree by which rates are hiked. Such a statement could push the dollar lower.
