guessing jobs added/lost, economy-wide each month
The labor force in the US is about 150 million workers. Of that, somewhere around 3 million each month leave their jobs and another 3 million or so start new work. The difference between the last two, which amounted +272,000 jobs in May, is what the jobs report announces. It’s accurate to +/- 100,000 jobs–and that’s after two subsequent monthly adjustments for late-arriving reports from companies that participate in the government survey.
In other words, in my view, as an equity investor this is one of the last numbers you’d care to bet the farm on.
jobs and bonds
Stocks, bonds and cash are the three main categories of liquid investment. For the latter two, the interest rate is crucial, since it’s the main determinant of price (with credit quality playing a supporting role).
For stocks, not so much. Stocks, bonds and cash are the three main liquid investment categories, with the fixed income market much bigger than the stock market. So, yes, the price of bonds (a function of interest rates and credit quality) does have an influence on the price of stocks. And if we thought rates would shoot through the roof from here, that would be a big negative for both stocks and bonds. But that’s not the case now.
where we are now
As I see it, we’re at a near-term high point for rates (all bets are off if Trump is reelected). This is also the consensus view. For bonds, the crucial questions are: when, how quickly and by how much will the Fed lower the Fed Funds rate. For stocks, in contrast, this would likely be a nice tailwind, whenever it happens. But the crucial issue, especially today, for stock market investors is where the hot spots of earnings growth will be–something brokerage house strategists seem to be ignoring. Maybe it’s because they’re bond experts, not stockpickers.
Although it may sound odd, the intense focus of Wall Street strategists on bonds (the much bigger market for them) at the expense of trying to figure out what corporate earnings growth is likely to be, is good for us as individual stock market investors. It increases the chances that we can uncover information that Wall Street hasn’t.
The consensus