Chart of the week: cause for concern?

Data-driven insights and analysis from our investment team every week.

We have recently taken a more defensive stance in our equity portfolios, reflecting growing concerns about the near-term outlook for the US economy. A key factor behind this shift has been a marked deterioration in the US jobs market. As illustrated in the chart below, the three-month moving average of non-farm payrolls has slowed sharply, with job creation now barely positive. This suggests that the strong post-pandemic recovery in employment may have stalled.

While this slowdown is notable, we believe it is likely to be temporary. Businesses and consumers are adjusting to the new tariff regime, and we expect hiring to resume once this transition stabilises. However, in the interim, there is a risk that investors may become nervous about US growth prospects which could lead to weakness in equity markets especially as they trade near all-time highs.

We expect the US Federal Reserve to respond with supportive policy, including potential interest rate cuts. This should help cushion the economy and support asset prices but may not eliminate the downside potential. As such, while we remain cautious in the short term, we would view any market corrections as opportunities to increase exposure to equities.