Jason Colodne of Colbeck Capital — Aug. 7 Market Rewind

With the release of better-than-expected jobs and employment data last week, investors undoubtedly were contemplating how the jobs market and the Federal Reserve’s plans to raise the federal funds rate’s target range might impact inflation, says Jason Colodne, co-founder of Colbeck Capital Management, an NYC-based private credit asset management organization focused on strategic lending.

Economic Snapshot

On Tuesday, data from the Bureau of Labor Statistics revealed job openings had fallen to 10.7 million in June, indicating the labor market may be showing signs of relaxing.

Approximately 1.8 open jobs still exist for each available worker, though.

The number of people who were hired and the amount of separations — which includes workers who quit, were laid off, or were discharged — remained essentially the same in June as in the month before. Hires equaled approximately 6.4 million, and separations totaled 5.9 million in June, compared to 6.5 million and 6 million, respectively, in May.

A separate BLS report released on Friday showed that, led by gains in the leisure and hospitality industries, professional and business services, and health care industries, total nonfarm payroll employment increased by 528,000 in July. The unemployment rate declined to 3.5% from 3.6% between June and July.

Since reaching a low point in April 2020, employment has grown by 22 million. Both employment and unemployment have now returned to the pre-pandemic levels they were at in February 2020.

Recent Market Activity

A variety of factors — including continued concern about a recession and federal government findings that indicated both monthly and year-over-year wage growth had been considerable in July — had an undeniable effect on investors’ appetites throughout the week.

On Monday, the S&P 500 declined 0.3%, then subsequently slipped 0.7% on Tuesday. Despite a 1.56% gain on Wednesday, the index again declined on Thursday, dropping 0.1%. On Friday, the S&P 500 lost 0.16%, according to initial post-closing results.

The Nasdaq composite index shed 0.2% at the start of the week, and then lost another 0.2% on Tuesday. By Wednesday, the index’s movement had reversed, with a 2.59% rise. However, after a 0.4% increase on Thursday, the Nasdaq declined 0.5% on Friday.

The Dow Jones Industrial Average dropped approximately 0.1% on Monday — followed by a 1.2% slide on Tuesday. On Wednesday, the index gained 1.29%; on Thursday, it fell 0.3%. On Friday, post-close estimates indicated the Dow was up 0.23% for the day.

Central U.S. Treasury yields fell on Monday, reportedly after U.S. manufacturing report findings offered hope that inflation may soon ease, with the 10-year yield at around 2.586% and the 30-year yield at 2.92%.

On Friday, though, the 10-year Treasury yield experienced an increase following the BLS’ robust jobs data announcement. Shortly after 4 p.m., the yield on the 10-year Treasury was at 2.83%. The yield for the 30-year Treasury bond had risen 10 basis points and was at 3.068%.

In other investment news, due in part to rising anxiety about a potential recession, Fitch Ratings has increased its prediction for 2023 U.S. institutional leveraged loan defaults to between 1.5% and 2%. The company is also forecasting U.S. gross domestic product growth in 2022 will be 2.9%, and in 2023, will be 1.5% — a revision from its previous predictions of 3.5% and 1.6%.

About Jason Colodne

Jason Colodne is the senior transaction partner at Colbeck Capital Management and oversees all aspects of investment execution and portfolio management. Colodne co-founded Colbeck Capital Management as a managing partner in 2009. Colodne’s investment experience spans over two decades.

About Colbeck Capital Management

Colbeck Capital Management (colbeck.com) is a leading, middle-market private credit manager focused on strategic lending. Colbeck partners with companies during periods of transition, providing creative capital solutions. Colbeck sponsors its portfolio companies through consistent engagement with management teams in areas such as finance, capital markets and growth strategies, distinguishing itself from traditional lenders. The firm was founded in 2009 by Jason Colodne and Jason Beckman; the principals have extensive experience investing through different market cycles at leading institutions, including Goldman Sachs and Morgan Stanley.