Non-farm payrolls data, a key economic indicator in the US, showed an increase of 165,000 in April, along with significant upward revisions of 140,000 on the March and February figures. Unemployment, meanwhile, was said to be at its lowest level since 2008 at 7.5%.
Viktor Nossek, head of research at Boost ETP, said: “US equities barely flinched following last March’s weak jobs numbers, and even after last week’s poor GDP data. April’s surging jobs data could turn the bull run into a distance event. Company fundamentals remain strong and the prospect of further QE remains.”
Elsewhere, current market conditions have been championed as stock-friendly, being fast enough to provide support for top line corporate earnings but slow enough to contain costs.
Russ Koestrich, chief investment strategist at BlackRoc, said: “While stocks are continuing to advance, the composition of the rally has started to change. Large- and mega-cap stocks are now outperforming smaller-caps, a trend we expect will continue. Additionally, some of the more expensive defensive sectors of the market (such as the utilities sector) are underperforming, while the technology sector has experienced better results and still looks inexpensive”
Not out of the woods yet
Wages grew just 1.9% in April which is barely in line with inflation, a situation attributed to the still-high level of unemployment and under employment.
Other potential headwinds include reduced government spending, particularly on defense weapons and personnel support which fell 7% in Q4 2012 and a further 4.1% in Q1 2013, and declining consumer sentiment, which has fallen despite the increase in personal consumption.
Mark Wynne Jones, co-manager of the Investec American Fund, said: “In an ideal world, we would recommend not attaching too much weight to any single piece of economic data, but rather employ a smorgasbord approach to assessing the health/direction of the economy.
“In addition to following both positive and negative surprise readings, there is merit in keeping an eye on leading indicators, although one must have a reasonably accurate picture on what makes a leading as opposed to a co-incident indicator.”
The Investec American Fund, launched in September 2010, currently has around £217m under management, the largest proportion of which, 22%, is in the health care sector, Its performance over six months is shown in the graph.