Interestingly, most of the job openings are in services sector and the cyclical sectors of the economy continue to post modest to flat growth in openings. IMO we will probably have a shallow recession where services sector might hold well akin to the 70s/80s. UR may stay below 4.5% and we might rebound sharply. The movement in wage growth (AHE) remains the key to control inflation. Earnings can be tricky if we get a shallow recession. IMO the biggest hit to earnings will be from profit margins as they can revert to the mean after a sharp bump up post covid.
Ex--You and I are focused on many of the same charts. I am renting the bear for a few weeks now. NFP needs grain of salt. First the 4 sigma surprise is astonishing (ex Pandemic). But the seasonal factor is massive in Jan, because of seasonal jobs. So it appears that jobs that normally get lost in this seasonal did not occur as much as might have been indicated by seasonal. So I am sceptical about it. One point that seems worthy making on the bullside, is that the Global New Orders / Inventory has turned up, which leads PMI by 2 mos or so. Although you quite rightly point out the US has not. The other crazy thing, among many crazy things that makes drawing conclusions difficult is the difference in monthly change in ISM services minus ISM manuf, was one of the largest on record. Btw--I am also looking at IG vs ISM, and another one is cyc/def vs ISM, both positive and disconnected. Despite all this, I am very sceptical of markets ability to perform. If I were to go full crystal ball, I would suggest that we have risk off into the Ides of March, noted for its historic time of inflection points. It reminds me that in a couple of weeks i will need to roll out that chart. I know Kantro is defending his position because Fed pivots always lead to a bounce, but sometimes they don't hold, such as in 2000. Like the Zen master says, "we will see, what we see". Well at least this week we have break from immense data and central bank events risks. Last week was honestly a lot to deal with.
Interestingly, most of the job openings are in services sector and the cyclical sectors of the economy continue to post modest to flat growth in openings. IMO we will probably have a shallow recession where services sector might hold well akin to the 70s/80s. UR may stay below 4.5% and we might rebound sharply. The movement in wage growth (AHE) remains the key to control inflation. Earnings can be tricky if we get a shallow recession. IMO the biggest hit to earnings will be from profit margins as they can revert to the mean after a sharp bump up post covid.
Ex--You and I are focused on many of the same charts. I am renting the bear for a few weeks now. NFP needs grain of salt. First the 4 sigma surprise is astonishing (ex Pandemic). But the seasonal factor is massive in Jan, because of seasonal jobs. So it appears that jobs that normally get lost in this seasonal did not occur as much as might have been indicated by seasonal. So I am sceptical about it. One point that seems worthy making on the bullside, is that the Global New Orders / Inventory has turned up, which leads PMI by 2 mos or so. Although you quite rightly point out the US has not. The other crazy thing, among many crazy things that makes drawing conclusions difficult is the difference in monthly change in ISM services minus ISM manuf, was one of the largest on record. Btw--I am also looking at IG vs ISM, and another one is cyc/def vs ISM, both positive and disconnected. Despite all this, I am very sceptical of markets ability to perform. If I were to go full crystal ball, I would suggest that we have risk off into the Ides of March, noted for its historic time of inflection points. It reminds me that in a couple of weeks i will need to roll out that chart. I know Kantro is defending his position because Fed pivots always lead to a bounce, but sometimes they don't hold, such as in 2000. Like the Zen master says, "we will see, what we see". Well at least this week we have break from immense data and central bank events risks. Last week was honestly a lot to deal with.