4 market experts share 10 places to invest your money after September’s jobs data blew expectations out of the water

• September’s jobs data wildly exceeded consensus expectations, making a soft landing more likely.
• 254,000 new jobs were added, and unemployment numbers dipped.
• Below, four market experts share how investors should allocate their money going forward.

After much anticipation, the September jobs data finally arrived.

The US job market blew past economists’ predictions, with total nonfarm payrolls increasing by 254,000 last month — over 100,000 more jobs than expected. The unemployment rate dropped to 4.1% from 4.2% in August.

This optimistic data broke the streak of lackluster job growth that the US economy experienced in July and August.

It is now looking more likely that the Federal Reserve pulled off a soft landing by raising interest rates to slow inflation without damaging the labor market to the point of a recession. With this in mind, how can investors allocate their money accordingly? Below, we’ve compiled four Wall Street expert opinions on the state of the labor market and the overall economy.

Liz Ann Sonders, chief investment strategist, Charles Schwab

The headline number may be eye-catching, but Sonders believes some of the other data points are more telling about the overall economy.

Don’t expect a uniform economic recovery, according to Sonders. Strength in services hiring is offsetting weakness in manufacturing. Sonders highlights healthcare and government in particular as areas with strong hiring trends in the last few months. According to her, the manufacturing sector is going through a recession, as indicated by continued contraction of the ISM manufacturing index.

The sectors that added the most jobs included food services, healthcare, government, social assistance, and construction. On the other hand, manufacturing jobs fell by 7,000.

Rate-sensitive parts of the market, such as utilities, financials, and real estate investment trusts (REITs) should perform well going forward, according to Sonders.

Sonders believes there’ll be a long road back to normal. Even though the Fed has begun its monetary easing campaign, it’s too early to assume that a recession has been averted.

“You still want to stay up in quality,” Sonders said. Investors should focus on company profitability and look for strong balance sheets, free cash flow, and return on equity. These characteristics will help quality companies weather continued economic choppiness.

Jeffrey Roach, chief economist, LPL Financial

With a stronger-than-expected jobs report, there’s no need for the Fed to initiate another aggressive 50 basis point cut, according to Roach.

The individual consumer is holding up well. Layoffs have remained low for the last three months, and wage growth has been robust, which means that households have been able to absorb some of the effects of higher inflation, Roach said. Average hourly earnings increased by 0.4% in September and are up 4% year-over-year, indicating a continued increase in real purchasing power.

If you have cash on the sidelines, hold off investing in equities for now, Roach recommends. He expects volatility to remain heightened going into the election and believes there will be better entry points to the stock market later on.

Now is the time to continue taking advantage of higher rates on money market funds and short-term bonds before they fall going into next year, Roach added. He expects 100 basis points of rate cuts within the next year. Roach highlights preferred securities in particular. Preferred securities can reduce portfolio volatility, provide income, and reduce interest rate risk.

Lisa Shalett, chief investment officer, Morgan Stanley Wealth Management

The labor market is receiving a bump from corporate America’s strong earnings and balance sheets, according to Shalett.

“This has been a market where companies have been willing to hold on to employees and not panic,” Shalett said.

The decrease in the unemployment rate in September and the continued trend of muted layoffs are positive signs that companies are doing well. There’s no need for the Fed to cut rates aggressively going forward, in Shalett’s opinion.

Shalett recommends investors continue looking for value across the whole market, focusing on quality companies as the market broadens. She doesn’t think the economy has strengthened enough for small-caps to take off yet, but mid-caps are a good investment opportunity as a soft landing becomes more likely. Investing in the equal-weighted market index will give investors more exposure to non-tech companies. And now that rates are slowly but steadily decreasing, Shalett recommends moving up the yield curve through investment-grade bonds with a duration of four to six years.

Chris Zaccarelli, chief investment officer, Independent Advisor Alliance

The job market is showing signs of strengthening with the September data.

“This should put to rest — at least for the next month — the idea that the economy is about to fall off a cliff or that imminent doom is on the horizon,” Zaccarelli wrote in an email.

Investors have reason to be optimistic, but they shouldn’t focus too much on a single data point, cautions Zaccarelli. One phenomenal report doesn’t mean the economy is completely recovered, just like how one or two lower-than-expected reports don’t signal recession.

With that being said, the current environment presents many opportunities to invest in equities, according to Zaccarelli. He favors areas such as industrials and materials. If the economy doesn’t fall into recession, which seems increasingly likely after this jobs report, Zaccarelli believes these cyclical areas of the market will outperform.

“Recession fears are elevated, and we think those are underpriced, underappreciated parts of the market,” Zaccarelli said.