Weekly Market Pulse: No Data, No Problem

The recent federal government shutdown delayed the monthly employment report, which the author suggests may be perceived positively by investors due to the absence of potentially negative data. However, the ADP report indicated a loss of 32,000 jobs in September, albeit with complexities from annual revisions, amidst a broader trend of increasing layoff announcements, notably led by the government sector. Concurrently, market valuations remain elevated, with an index trading at 22 times 2026 operating earnings and 28 times trailing 12-month earnings.

Analysis

The federal government shut down last week, so we didn’t get the monthly employment report last Friday, and I think that may be the best news investors have gotten all year. I expect a lot of government-generated Weekly Market Pulse: No Data, No Problem Summary - With the political blame pretty evenly spread around so far, neither side seems to have much incentive to compromise. - The ADP employment report showed a loss of 32k jobs in the month of September, but the report was somewhat confusing due to annual revisions. - There have been a lot of layoff announcements this year, with government leading the way, something that has probably never been true before this year. - The index isn’t cheap, trading at 22 times the 2026 operating earnings estimate and 28 times trailing 12-month earnings. Joe has worked in the financial services industry since 1992 in various capacities, including Operations Manager, Compliance Manager, Registered Representative and Portfolio Manager. From 1997 to 2006, when he founded Alhambra Investment Management, Mr. Calhoun was a Director of Investments at Oppenheimer & Co. Mr. Calhoun holds the Series 63 (Uniform Securities Agent State Law) and 65 (Uniform Investment Advisor Law) securities licenses. He has previously taken and passed the Series 7 (General Securities Representative) and Series 9/10 (General Securities Sales Supervisor) securities exams. Joe proudly served in the U.S. Navy’s nuclear submarine service for 8 years (1983-1990) and was awarded several commendations including the Navy Achievement Medal in 1987. He studied engineering at the University of South Carolina and is a graduate of the U.S. Navy’s Nuclear Propulsion School. He founded Alhambra Investment Management as a registered investment advisory to address the needs of the individual investor. His market commentaries are widely read and published at various online outlets. He has appeared on Larry Kudlow’s program on CNBC and various radio programs. He is also an editor of the website RealClearMarkets.com. The current market environment is characterized by a notable disconnect between elevated equity valuations and weakening economic indicators, compounded by political uncertainty. The federal government shutdown has delayed the official monthly employment report, creating an information vacuum that obscures the true state of the labor market. However, available private-sector data from the ADP employment report points to a contraction, with a 32,000 job loss in September, a signal that aligns with a broader trend of significant layoff announcements this year, unusually led by the government sector. These negative fundamentals contrast sharply with market pricing, as a key index is valued at a stretched 22 times 2026 estimated operating earnings and 28 times trailing earnings. Furthermore, the political stalemate, with little incentive for compromise, suggests the shutdown and its associated economic drag may persist, adding another layer of risk for investors.

Key Decisions for Investors

• Given the market's high valuation multiples of 22x forward and 28x trailing earnings, investors should exercise caution and review portfolio exposure to potentially overvalued assets in light of the negative economic signals.
• It may be prudent to reduce exposure to cyclical sectors that are highly sensitive to labor market weakness, as indicated by the ADP job loss report and the broader trend of layoffs.
• Investors should closely monitor the political stalemate in Washington, as a prolonged government shutdown could increase economic uncertainty and serve as a negative catalyst for market sentiment.
• In the absence of official government data, place increased emphasis on alternative economic indicators like the ADP report to gauge labor market health, while remaining aware of their inherent volatility and potential for revision.