Stronger job reports = equities going lower.
Weaker job reports = equities going lower.
Meanwhile, people continue the myopic, binary-outcome argument about "when does the Fed pivot?"
Not only is a Fed "pivot" not occurring, even if it did it's not resuming a secular bull market in stocks.
➡️Especially not in the pandemic story stocks.
➡️Especially not in high-beta (high-risk), and high P/E's.
➡️Especially not in the worst credit, junk bonds, and the pile of excrement that exists across a decent portion of private equity/private investments.
✍🏼 Weaker jobs reports would show further deterioration in our economy.
✍🏼 Stronger jobs reports provide more fuel for the Fed to continue on a hawkish path and raise rates further.
✍🏼 They've made clear that they have to impact demand, inflation and by doing so it impacts the job market negatively
The Fed is interested in slowing the job market and slowing wage inflation.
The higher the Fed Fund Rate goes, the more the cost of capital goes. What does that mean? It means the cost of anything of leverage, of loans, of purchases, of levering up for any type of investment goes up. And not just by a fraction.
Simultaneously, the higher yields go, the more appealing the "risk-free rate" zone on UST's becomes. Because yields are
So if you're holding high-beta stocks with a high P/E (that’s price to earnings ratio) and we’re experiencing higher market volatility and deteriorating economic data, what are you going to do?
You might look over and see US Treasuries yielding more than they have in 15 years. Short term T-Bills (3mo, 6mo, 1yr maturities) up through the 5-yr UST is over 4% now. It hasn't been this high since mid-2007.
To be serious about investing, you must understand the bond market, and understand the effect on risk assets when we have a rate-of-change move of this magnitude, this quickly, at a time when we've arguably been in the "everything bubble" of risk assets.
The rate-of-change in Fed rate-hikes is rapid. One of the fastest moves in history. That means everything has to re-price.
We are moving toward (not yet, but moving toward) a time when we may see 5% US Treasuries, and overlooked stocks with low P/E's and attractive dividends. Ideas you're probably not familiar with and haven't considered. And the "story stock" time will be solidified as over when it manifests itself in risk/return.
If your investment language, following the noise from social media, has only been tech related you're going to have to sit and hold the stuff you paid a high price for, waiting for it to catch up and/or be acquired, merged away, etc.
As we finish out the year, be cautious with where you get your info. People with two years of trading at home have hundred of thousands of followers and make a living on giving hot takes.
✅ You are not BTFD ("buying the f'ng dip")
✅ You are not YOLO'ing
✅ You are not "missing out" (FOMO)
✅ You should not be playing Investment Hero right now.
Remember, this is your hard-earned capital.
Be smart with it.