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Home»Finance»Goldman says forget the election, the bigger market story is rising wages
Finance

Goldman says forget the election, the bigger market story is rising wages

DeepBy DeepNovember 9, 2016No Comments2 Mins Read
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A teacher in her classroom after school.

Bill O’Leary | The Washington Post | Getty Images
A teacher in her classroom after school.

While all eyes are on Tuesday’s presidential election, Goldman Sachs told clients the real story for the market was the better-than-expected increase in wages contained in Friday’s jobs report.

This inflationary trend should cause certain stocks to outperform into the new year, the firm said.

“While investors focus on the election, stocks focus on rising wages and expected inflation,” Goldman Sachs’ David Kostin wrote in the note to clients Friday.

“Investors’ other focus has been the 3Q earnings season, which saw more frequent beats than usual but also negative management commentary and subsequent downward EPS revisions. In particular, companies highlighted the margin risk from higher wages.”

October average hourly earnings posted a 2.8 percent annualized increase, the biggest jump in seven years, according to the Labor Department.

Kostin said a basket of companies with low labor costs has outperformed the basket of high labor cost by 7 percentage points since late June. In addition, the strategist cited recent comments from the Federal Reserve’s Janet Yellen, which “caused investors to wonder whether the FOMC will choose to let both employment and inflation continue to climb before significantly hiking rates.”

“Rising inflation supports the outperformance of cyclical sectors … over stocks with bond-like qualities [such as consumer staples],” he said.

source”cnbc”

bigger Election Forget Goldman is market? rising says story the wages
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