The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Labor’s fine.
Futures were up about 25 points, a modest rally, when nonfarm payrolls printed (139k vs 126k est & 147k prior revised from 177k). Futures jumped to +50 and that’s about all you need to know. Yields climbed and the FOMC cuts for the year are now 44 bips, 10 bips less than yesterday. Markets agreed that the labor market was strong and reacted accordingly.
The stock market wasn’t worried about a weakening labor market and their confidence was rewarded with today’s data. The US economy continues to create a large number of jobs each month and this fact reinforces the speculation that the US economy is humming along nicely. Perhaps bond and rates markets were too worried about an economic bump in the road because there appears to be none, nor are there concerning risks on the horizon.
Since the outlook looks clear, bulls are running with stocks. The S&P broke above 6000 today and is only about 2.4% below the former highs. Longs are looking at that gap as easy money and with today’s labor number out of the way, it looks like getting above 6147 will be an easy run. It’s not hard to imagine us doing that next week.
When we break above 6147 and start printing new all-time highs, the behavior of the tape will be tougher to predict. Consensus is that we’re in a bull market so upside will be the only side. How quickly will it climb? How choppy will the path be?
Most investors don’t even care. They are concluding that we are in a bull market, that it is robust, that there are no risks in the way, and that double digit returns in 2025 are pending. The S&P is up 2% this year, that leaves eight juicy percentage points to be enjoyed. The optimism is becoming greed. We’re at the earliest moment of that turn but it’s coming.
I think frothy could be a good adjective for the coming rally. I think it’s a game of musical chairs but for the immediate future, nobody is stopping the music.
See you Monday, have a great weekend.
-Mike
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