October 04, 2024 | Read Online

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"Just because I don't care doesn't mean I don't understand."

— Homer Simpson

Friday no-change charts

The stock market appears to have everything priced in.

An amazingly strong jobs report failed to move stock prices today, even though the primary market worry seemed to be a weakening jobs market.

Even more unexpectedly, the North Carolina mining operation that provides 90% of the global supply of quartz needed to make semiconductors suddenly found itself fully underwater at the start of the week — but the hivemind of semiconductor stocks seemed to think it wouldn't matter much. (It was right. The mines suffered only "minor damage," as it turns out.)

Similarly, neither war in the Middle East nor the upcoming election (the most consequential of our lifetimes, they keep telling us) has stopped equities from hanging around their all-time highs.

Most impressively, stocks seemed to know that the East Coast port strike that threatened to grind global trade to a halt at the start of the week would be settled quickly and peacefully.

It was.

What does the market know that we don't?

Maybe it's just that things are good.

When port workers can extract a 62% raise (over six years) in return for a promise to stay on the job for three months before making some more demands, perhaps it's a sign that both labor and capital are doing very well.

Labor is certainly feeling its oats, with even writers of overly long-form journalism (aka, The New Yorker) and newly unionized people grading trading cards now threatening to put their laptops and Pokemon cards down and go out on strike.

You wouldn't expect these types of service workers to have the same bargaining power as longshoremen — but in an economy where the convenience store Buc-ee's is paying store managers as much as $225,000 a year, maybe they do?

Amazingly, all this is happening at a time when the Fed has just embarked on a new easing cycle, creating a unique economy in which interest rates are falling at the same time that corporate profits are rising.

There are risks, of course — spreading war, resurgent inflation, peak profit margins, snarled supply chains, stretched valuation, a Fed mistake (in either direction)...

But just because the market doesn't seem to care about any of these things doesn't mean it doesn't understand them.

Let's check the charts.

Jobs are plentiful again:

Nonfarm payrolls rose by 254,000 in September; July and August jobs data was revised 72,000 jobs higher; and the unemployment rate dropped to 4.1% — a full reversal of the recent narrative of an economy on the precipice of recession.

Prime-time workers:

The labor force participation rate for prime-age workers remained near all-time highs. The rate for native-born workers is the highest on record (contrary to the political narrative).

Another myth buster?

For all the concern about US money printing, Scott Grannis notes US money supply is nearly back to trend.

Trend change:

The rate of US obesity has turned lower, which might create a multi-decade economic tailwind with all kinds of positive knock-on effects.

No trend change:

The bull market in US equities turned two years old this week. The S&P's 60.7% gain from the lows makes it the fourth best bull market of all time.

Ned Davis Research, noting that these things rarely die of old age, believes that "the path of least resistance is a continuation of the bull market."

Good timing?

Equities tend to rise after presidential elections. That's probably because, whoever wins, 50% of Americans will feel more optimistic as a result. This time seems no different, with many business and investment decisions seemingly put on hold pending the election.

The economist Mark Zandi notes this morning's data is evidence that the "economy is about as good as it gets" and that may be the last bear case for US equities and the economy — if things can't get any better, it may be that they can only get worse.

But I wouldn't worry about it — the market probably has that priced in, too.

Have a great weekend, understanding readers.

— Byron Gilliam

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Kathy Jones @KathyJones

Real wages are rising by about 1.5% to 2.0% while productivity is rising by 2% to 2.5%. Adding jobs is not necessarily inflationary.

tw profile: Bloomberg TV Bloomberg TV @BloombergTV

"Inflation is not dead," Mohamed El-Erian, Queens' College Cambridge president, says while discussing what the September US employment report means for the economy and Federal Reserve monetary policy trib.al/XDw3TOR

2:28 PM • Oct 4, 2024

48 Likes 14 Retweets

6 Replies

Carl Quintanilla @carlquintanilla

NYT: ".. one of the pandemic's most unexpected economic legacies: an entrepreneurial boom. .. Americans started businesses at the fastest rate in decades."

@nytimes@bencasselman 🇺🇸
nytimes.com/2024/10/04/bus…

3:55 PM • Oct 4, 2024

53 Likes 20 Retweets

5 Replies

Noelle Acheson @NoelleInMadrid

Yesterday SWIFT confirmed its hefty foray into digital asset services, in a move that not only underscores expectation that all banks will soon be tokenizing, but also highlights the role of plumbing.

This is about more than messaging. It's about structural transformation. 🧵