A Good Time for Active Management

The research is in, and everyone agrees: This is a great investing landscape for active management. Nearly half of all actively managed U.S. stock funds did better than a composite of index funds in the 12 months through June, according to Morningstar.

The reason? Stocks are moving less often in herds, a departure from the years following the Great Recession. A scattered performance gives stock-picking managers more opportunities to differentiate themselves from index funds.

The Standard & Poor’s 500 rose 15.5 percent in the year through June 30, but that masks some big differences in performance underneath. The best-performing sector of the 11 that make up the index, financials, jumped nearly 33 percent over that time. The worst, telecoms, lost nearly 16 percent. That gap of nearly 49 percentage points between the first- and last-place sectors compares with a gap of 28 percentage points at the end of last year.

What Makes Millennials Sick

Do your money troubles make you sick? Financial anxiety has made about a quarter of millennials feel physically ill, according to a new study by Northwestern Mutual. It's also made more than half feel depressed.

For many millennials, who came of age and entered the job market during the economic recession, the bad feelings are pervasive. Some 69 percent said they experienced anxiety because of their income, 67 percent said it was because of their level of savings, and 53 percent said it was because of worry about losing their job.

About a third of the millennials surveyed said they were prone to excessive or frivolous spending, more than the 26 percent of those in Generation X and 19 percent of baby boomers who said this. Millennials spent $233 a month on meals, compared with $182 in older generations, and $161 per month on cellphone charges, versus $135 for people in older generations.

Worries for the Car Business

In the periodic Beige Book of regional economic reports, the Fed said that the U.S. economy expanded at a modest to moderate pace in July through mid-August, but that signs of an acceleration in inflation remained slight. While consumer spending increased in most districts, there are also many signs of worry about a prolonged slowdown in the auto industry.

In Cleveland, year-to-date production at auto assembly plants declined more than 16 percent when compared with the same period a year ago, although much of decline was due to retooling. Slowing demand for autos has led some of the Fed's reporters to temper their outlook for the economy in coming months. In Chicago, one contact noticed auto suppliers no longer are searching for space to build new factories.

Vehicle sales in August slumped to the worst rate in more than three years. After a multiyear auto expansion, there are mounting signs that American car buyers are beginning to lose interest.

Manufacturing Shows Strong

U.S. factories expanded at a brisk pace in August, a likely sign of strength for the U.S. economy as new orders, production and employment all improved. The Institute for Supply Management said last week that its manufacturing index rose to 58.8 percent last month from 56.3 percent in July.

Anything above 50 signals that factory activity is increasing. The measure now stands at its highest level since April 2011, pointing to solid economic growth.

Of the 18 industries in the index, 15 showed expansion, while only apparel, primary metals and furniture contracted. On Friday, data from the Bureau of Labor Statistics showed that manufacturing was one of the leading sources of U.S. job growth in August, adding 36,000 new positions.

Hollywood's Bummer Summer

Did you have a good summer? It was probably better than the one Hollywood had. The 18-week summer movie season — the first weekend in May through Labor Day weekend — is down more than 14 percent compared with the last two years.

The final numbers aren't in, but this will all but certainly be the first time in a decade that the summer season didn’t break $4 billion at the box office. The month of August brought in $649.5 million, a nearly 35 percent decline compared with the $993.8 million the August box office brought in last year.

Adding insult to injury, the movie business is set to end the season with possibly the worst Labor Day weekend in 30 years. Over the holiday weekend, there wasn't a single major wide release opening in theaters for the first time since 1992.

Thoughts for Labor Day

"When you have a country that can boast that more than 95 percent of its eligible workforce is employed and pumping money back into economy, that's exceptionally good news, especially as we prepare to observe Labor Day." ~ J. D. Hayworth

"God sells us all things at the price of labor."  ~ Leonardo da Vinci

"A mind always employed is always happy.  This is the true secret, the grand recipe, for felicity."  ~ Thomas Jefferson

August's Jobs Report

The employment situation cooled off slightly in August, with the economy adding 156,000 jobs, according to figures out this morning. That's down a bit from the average gain of 185,000 over the past three months. The headline unemployment rate ticked up to 4.4 percent.

Overall, hiring this year has averaged 176,000 a month, roughly in line with 2016's average of 187,000. The leading source of job growth in August was manufacturing, which added 36,000 jobs. Another 28,000 jobs came from construction.

One mystery remains: Why, with the economy nearing full employment, wages aren't rising faster. Average hourly pay has risen just 2.5 percent over the 12 months ending in August. Pay raises typically average 3.5 percent to 4 percent when the unemployment rate is this low.