E*TRADE: Jobs, Inflation Not the Full Picture for Investors Investors may be releasing a big sigh of relief that inflation isn't on the rise coming off of last week's jobs report and commentary from the May Federal Reserve meeting. But while investors may have the impression that it's now smooth sailing, the bears aren't convinced. And nor is E*TRADE, the New York-based brokerage firm, which argued in a recent blog post that the jobs report and inflation aren't the only things that investors and traders should consider. "Cautious optimism seems to be the most common reaction to last week's Fed statement and jobs report, and the stock market closed the week on a generally positive note despite slight overall declines for both the S&P 500 and Dow Jones Industrial Average," wrote E*TRADE Financial Corporation (ETFC) in the post. "So if we truly are in a jobs economy that is just right, should we, like Goldilocks, help ourselves to some tasty porridge and settle in for a nap? Hardly. As the fate of that young trespasser reminds us, complacency is dangerous. Volatility may well be the new normal, and since it's anyone's guess when we will reach the end of this current bull run, investors should remain vigilant." [See Investopedia's TD Ameritrade review to learn about this low-cost broker with powerful charting tools.] For April, the jobs report showed less of an increase than what economists were expecting. On top of the job growth, which came in at 164,000 but below the 190,000 that Wall Street had expected, hourly wages rose just 0.1% in April, lower than the expectation for a 0.3% increase. The unemployment rate stood at 3.9% at the end of April. For several weeks now, fears have been swirling that the red-hot economy and corporate earnings growth would lead to increased inflation and thus a more aggressive Federal Reserve. With the market already anticipating a total of three interest rate increases for 2018, any signs of rising inflation could change the outlook. But with the jobs report for April out and the Fed's move to keep interest rates steady for May, although a rate hike is expected in June, bulls are out in force opining that the economy is in a good spot, fundamentals are strong and stocks should move higher. The bears, however, think the Fed will raise interest rates more than anticipated, which could create headwinds for stocks – with the exception of banks, which benefit from a rising rate environment. While it's anyone's guess what will happen in the months to come, E*TRADE is advocating that investors remain diversified, making sure the investment portfolio and its allocations are optimized for the investor's risk tolerance. "Though jobs data and inflation are important components of the U.S. economy, they are not the only factors. They should be assessed within the context of other signals like GDP, CPI, housing and a host of additional indicators economists and market movers alike digest," wrote E*TRADE.
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