Image Source: The January jobs report was on fire this past week, exceeding almost all predictions by economists. A total of 353,000 new jobs were created, and the unemployment rate fell to 3.7%. The data was interesting because, when combined with the GDP growth, low inflation, and the surging stock market, it paints a picture of an economy performing well.Despite the promising numbers, some people still feel a recession is imminent. According to a , one in two economists expects a recession this year. Further, many hedge billionaires have been warning publicly about a recession recently, which makes one wonder if they know more than the rest of us. On the other hand, they may be invested in short-term Treasuries, which do comparatively better during recessions.However, it needs to be clarified how an economy with sub-4% unemployment moves into a recession. Since the pandemic, it has survived 40-year high inflation, record oil and gas prices, the Russo-Ukrainian War, and conflict in the Middle East. As a result, I am personally staying in equities because I buy and hold. A recession will eventually happen, but the data does not currently show it.
Stock Market Overview
Recent data revealed that stock markets were generally positive for the week. The Dow Jones Industrial Average, S&P 500 Index, and the Nasdaq Composite had gains. Mega-cap tech stocks and some cyclical sectors have also done well. However, the Russell 2000 fell on weakness in regional banks after poor results and a . Many regional banks are small- and mid-cap stocks.9 of the 11 sectors gained this week. The Consumer Cyclical, Communication Services, and Consumer Defensive sectors were the top performers. However, the Technology, Real Estate, and Energy sectors were the worst performers.Oil prices fell over 7% on news about the Middle East and a potential ceasefire after the Federal Reserve kept rates constant, ending at ~$72.41. The VIX rose to 13.85, which is still well below its long-term average. Gold climbed to ~$2,057 per ounce.(Click on image to enlarge)Source: Stock RoverThe markets continued to move upward due to the economy’s strength. The Nasdaq led the way, followed by the S&P 500 and the DJIA. However, the Russell 2000 was still negative due to weakness in small-cap equities, as previously mentioned.While 9 of the 11 sectors gained this week, only 6 have seen positive returns overall. The top performers in 2024 have been Communication Services, Technology, and Healthcare, while the Utilities, Basic Materials, and Real Estate sectors have been trailing.(Click on image to enlarge)Source: Stock RoverOur strategy started the year down. Larger market capitalization stocks have been performing better than smaller ones. The table below shows their performance by category. However, dividends and passive income streams have continued to grow.
(Click on image to enlarge)Source: Stock Rover
Stock Market Valuation This Week
The S&P 500 Index has recently traded at a of 26.91X, and the Schiller P/E Ratio is about 32.37X. These multiples are based on trailing twelve months (TTM) earnings. The long-term means of these two ratios are approximately 16X and 17X, respectively.Overall, the market is still overvalued despite the recent correction, the bear market, and the recent rebound seen in the markets. Earnings multiples of more than 30X are overvalued based on historical data.More By This Author:3 Blue Chip Dividend Stocks To Play Defense New York Community Bancorp Dividend Cut3 Dogs Of The Dow Picks For The New Year
Stock Market This Week – Saturday, Feb. 3
