Zacks Investment Management

Zacks Investment Management provides insight into the biggest news stories and key factors that we believe are currently impacting the market such as:

• Debt ceiling saga’s a wrap
• U.S. labor market shows resilience
• U.S. low employment rates
• Service activity cools in the U.S.

Debt Ceiling Drama: Gone, But Not Forgotten – The recent agreement to suspend the debt limit through January 1, 2025, puts the issue of debt/obligation default to rest—for now. In our coverage of the debt ceiling showdown, we pointed out to readers that we (and the markets) have seen this movie many times. And we’re likely to have to watch it again. Other than Denmark and the U.S., no other developed country passes spending plans and then votes on whether to pay for the spending. In Denmark, the debt limit is so high that political wrangling does not put the country’s debt at risk, leaving just the U.S. as a country where this is an issue. As seen in the latest projections for federal debt over the next ten years – even with the cuts just agreed to in the latest deal – debt as a percent of GDP is expected to keep rising steadily. That makes the possibility of future fights over spending likely, which will almost certainly subject markets, investors, and taxpayers to another bout of drama and uncertainty—and potentially compromise the U.S.’s status as the stable center of global finance.¹

Set Yourself Up for Long-Term Investing Success

Emotions can run high for long-term investors, but in our view, staying invested is key. Since 1926, investors who remained in the market over the long term came out ahead 99% of the time.²

It’s important to maintain perspective during rough periods so you don’t overreact. If you have $500,000 or more to invest, get our free guide, How to Avoid Emotional Investing. It provides our advice, based on decades of experience, to help you navigate through turbulent times.

Download Our Guide, How to Avoid Emotional Investing.²

Source: Congressional Budget Office³

The U.S. Labor Market That Won’t Quit – May’s jobs report continued a strong trend that’s been evident for years. The takeaway is that if there’s a problem in the labor market, there are too few workers—not too few jobs. In May, payrolls rose by 339,000, nearly double analyst expectations. Previous months were also revised up by 93,000, signaling that the jobs market was even stronger than we understood it to be. Readers may point out that the unemployment rate rose for the month, from 3.4% to 3.7% (chart below). But that’s more about statistical quirks than a faltering employment picture. For example, in one employment survey, the number of people with multiple jobs is only counted once, and unincorporated self-employed workers and workers on unpaid leave are also excluded. When adjusting for these quirks, the employment picture looks as robust as ever, with some 1.6 million jobs added in the first five months of this year. Some have pointed out that while employment is rising, productivity is falling, resulting in flat or possibly negative output growth. If productivity is weak, there is a reasonably good argument we could have a mild recession even with solid employment. In our view, that’s the type of recession that shouldn’t disrupt markets much at all.⁴

U.S. Unemployment Rate Remains Historically Low

Source: Federal Reserve Bank of St. Louis⁵

Services Activity Cooling in the U.S., But Still in Expansion Mode – The Institute for Supply Management’s purchasing managers index (PMI index) for May fell slightly, to 50.3. This is the lowest reading in 2023 for business activity in the U.S. service industry and signals that the economy’s services sector is neither expanding nor contracting. As activity cools, hiring remains strong, however, as the May payrolls report showed increased employment in leisure, hospitality, and construction. According to Anthony Nieves, who heads up the ISM’s survey, “the majority of respondents indicate that business conditions are currently stable; however, there are concerns relative to the slowing economy.”⁶

No matter how these stories unfold, it is impossible to control the highs and lows of the market. But there are ways you can manage the highs and lows of your own emotions and stay focused on your long-term investments.

In our view, staying invested is key – since 1926, investors who remained in the market over the long term came out ahead 99% of the time.⁷

If you have $500,000 or more to invest, get our free guide, How to Avoid Emotional Investing.⁷ It provides our advice, based on decades of experience, to help you navigate through turbulent times.

Disclosure