With so much uncertainty, the S&P won’t push much higher this year. B. Riley’s Art Hogan explains why.
Transcript:
CAROLINE WOODS: You mentioned that there’s plenty to be concerned about, whether it be trade uncertainty and the unknowns around that, the labor market, or the inflation picture. But then I was taking a look, and you’re holding your S&P year-end target of 6,600, which implies not much upside from here, but also not downside. So explain that 6,600 price target?
ART HOGAN: Sure thing. Yeah, we can go on a bumpy ride between now and the end of the year. I certainly think September is historically that time. We may see that. I think we have plenty of catalysts on the short-term horizon to give us that sort of 5% to 10% pullback, which would not surprise anybody.
In the month of September, a couple of other things might drive that. The uncertainty around trade is certainly a large catalyst that could be a headwind for markets. But away from that, how weak does the labor market get before it stabilizes? I think one of the drivers of weakness in the labor market clearly comes from uncertainty around trade, keeping corporations from creating new jobs. The other is we just don’t know how much, in the near term, artificial intelligence is starting to take away entry-level jobs for new college grads.
Right now, the unemployment rate for the 18 to 34 demographic is about 10%. If that continues, and we haven’t made the transition to find new jobs for new college grads, that can continue to show weakness. On top of that, we’ve got 11,000 baby boomers retiring every month. So the workforce demographic is really unclear right now. Add to all of that, much less immigration. Last year, we needed to create about 150,000 jobs a month to keep unemployment unchanged. That new normal may be about 50 to 75,000 jobs. We’re below that right now. If we remain below that, unemployment will continue to rise.
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