Insight post

Aug. 19, 2020

Marc's Market Insights


The July Jobs Report, Congress at a Stalemate, and Trade Tensions


The U.S Bureau of Labor Statistics released the July jobs report the first week of August, highlighting that the U.S. added 1.8 million jobs in July, a small step forward for a country that’s still down 12.9 million jobs during the pandemic.


July marked the third straight month of improvement after the COVID-19 lockdown that decimated the labor market, and the job gains have even exceeded economists’ expectations. However, it is worth noting that July’s “increase” was significantly below the 4.8 million jobs added in June. And while the unemployment rate fell to 10.2%, it remains above the Great Recession high of 10% that was reached in October 2009.


It is certainly positive news that July’s payrolls and unemployment reports came in better than expected.  However, there may be some undesirable consequences from what seems to be positive news. The better-than-expected jobs report may allow policymakers in Washington to approach negotiations for another round of stimulus checks lackadaisically because some may perceive that there is no immediate threat to the economy. In our view, this is problematic as we believe the sharp market recovery has been driven entirely by government spending and Fed intervention.


The reality is that lawmakers are still struggling to negotiate another COVID-19 relief package, and according to reports, negotiations are still far away. With the $600 weekly unemployment stipend expiring at the end of last month and COVID-19 cases continuing to spike across the country, Congress’ recess could not have come at a worse time.


To make matters worse, trade antagonism is driving headlines as of late and there have been no positive signs of the situation improving.


While there is large support for more aggressive stances with China, the singling out of the Canadian aluminum trade is hard to defend.  We just signed the United States Mexico Canada Agreement on July 1 – our allies will assume the U.S. is negotiating in bad faith if we prove that we can’t stick to deals made a month ago.


As uncertainty persists surrounding the pandemic relief package, trade tensions and the upcoming election, investors would not be wise to try to “time the markets.” What this pandemic has shown us is that the world is unpredictable and black swan events can impact the markets quickly and drastically. Investors should hope for the best and prepare for the worst.


So how can you protect your portfolio from the unknown? The answer is simple: seek out alternative solutions that effectively manage risk while also addressing your income needs. At Swan Global Investments, our philosophy is to remain always invested in the market through low-cost equity ETFs and always hedged through options strategies to help investors navigate and capitalize on bear markets and black swan events.


Marc OdoCFA, FRM, CAIA®, CIPM®, CFP®, Client Portfolio Manager, is responsible for helping clients and prospects gain a detailed understanding of Swan’s Defined Risk Strategy, including how it fits into an overall investment strategy. Formerly, Marc was the Director of Research for 11 years at Zephyr Associates.

Important Notes and Disclosures:

Swan Global Investments, LLC is a SEC registered Investment Advisor that specializes in managing money using the proprietary Defined Risk Strategy (“DRS”). SEC registration does not denote any special training or qualification conferred by the SEC. Swan offers and manages the DRS for investors including individuals, institutions and other investment advisor firms. Any historical numbers, awards and recognitions presented are based on the performance of a (GIPS®) composite, Swan’s DRS Select Composite, which includes non-qualified discretionary accounts invested in since inception, July 1997, and are net of fees and expenses. Swan claims compliance with the Global Investment Performance Standards (GIPS®).

All Swan products utilize the Defined Risk Strategy (“DRS”), but may vary by asset class, regulatory offering type, etc. Accordingly, all Swan DRS product offerings will have different performance results due to offering differences and comparing results among the Swan products and composites may be of limited use. All data used herein; including the statistical information, verification and performance reports are available upon request. The S&P 500 Index is a market cap weighted index of 500 widely held stocks often used as a proxy for the overall U.S. equity market. Indexes are unmanaged and have no fees or expenses. An investment cannot be made directly in an index. Swan’s investments may consist of securities which vary significantly from those in the benchmark indexes listed above and performance calculation methods may not be entirely comparable. Accordingly, comparing results shown to those of such indexes may be of limited use. The adviser’s dependence on its DRS process and judgments about the attractiveness, value and potential appreciation of particular ETFs and options in which the adviser invests or writes may prove to be incorrect and may not produce the desired results. There is no guarantee any investment or the DRS will meet its objectives. All investments involve the risk of potential investment losses as well as the potential for investment gains. Prior performance is not a guarantee of future results and there can be no assurance, and investors should not assume, that future performance will be comparable to past performance. All investment strategies have the potential for profit or loss. Further information is available upon request by contacting the company directly at 970-382-8901 or 361-SGI-081820