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The World Isn't ALL Bad

Happy Market Update! 

A couple of years back, I introduced Jackson to his first video game. Now before you get all up in arms, remember that people pay people to watch them play video games. As a good father, it is my job to help him learn about different industries so he can make an educated decision on his direction. It’s not like I drove him downtown to see if he wants to sell drugs or build tents.


Anyway, he is trying to fill the lack of football with something. I suggested getting a job, he laughed. We will be discussing that in the coming years, especially with the “massive job growth” (but more on that later). So we sat down with the original Call of Duty. You may remember this one. It’s about WW2 and you drop in behind enemy lines. You’ve only got so many shots before you have to reload your gun…you only have some many grenades. But you get to kill as many Nazis as you can…and I support this. He needed to learn about history anyway. I’ve never really seen anyone get so in to hunting for the bad guys. His aim was even improving as time went on. Sometimes the blood splatters on the screen. He kept getting closer to the tv to make sure he didn’t have any surprises around a corner!


We played the Jurassic Park Lego video game. Calm down. Affectionately named, the man with the hat, this is his favorite character to be. That is Alan Grant. He’s never seen the movie, I think he just likes the hat. God forbid if the game starts and I am that character. I have to immediately change…


Now that you are all awake, let’s dive into the rest of the newsletter.

 

Last Friday we did get the jobs report and it surpassed all forecasts. The actual was 353k from a forecast of 180k. Even the previous month was revised up significantly. Wow! The bond market did not like it (see bottom for MBS and 10yr). 


But what has been in the jobs reports? Not full time jobs. This chart makes me nauseous. In the thousands, this shows that part time work continues to sky rocket while the full time jobs are lost. This cannot be healthy for the market regardless of what the markets think. Don’t fight the trend, but I won’t be surprised if it turns down sharply.



YahooFinance provides this next chart. Of the job creation, there has been a surge in government and healthcare employment. Healthcare is considered a defensive stock, by the way. Those stocks typically do better than consumer staples during downturns. Not saying this has anything to do with it. I’m also not saying it doesn’t. And government? It’s easy to just make jobs in the sector you, as the government, control. “Hey, it’s coming in short!” “Hhhmmm…hire 300k people.” “Yes, sir!”


This tweet is from @LizAnnSonders. She notes that we have a massive plunge in the full time employment over the past three months, confirming the above. My thoughts…if you don’t want to layoff, you could just make a full time job a part time job. I wonder if that helps companies with bottom lines in terms of benefits. I think maybe…


What else has the bond market not liked? Powell. No surprise there. Go ahead and go listen to him in this past week’s 60 Minutes. Short? He said to expect 3 rate changes this year…while the market has been hoping for 6. 


But it is not all bad. The next two charts tell the tale of a typical election year and cycle. Feb and March don’t do well…but then, it’s off to the races. Well, watch out for September and October too, I guess. Once we (should) know who is president, we take off once again. 



Just remember that we are looking for rate cuts and what happens next. This next chart comes from multiple sources including Federal Reserve, Goldman Sachs, Wells Fargo, JP Morgan…to name a few. Complete source list available upon request. This chart looks way different than the ones above. And this, my friends is why I continue to be interested and amazed. It’s never a dull moment! 



10yr: Here is out 10yr chart. Remember down means lower rates (typically). I’m hoping we are building a ceiling to move down. The steep move from Oct to Jan was unsustainable. Let’s see if this can hold and move us back down. Today is a good sign after a butt kicking the previous two days. 


MBS: Remember up means lower rates. This one is not as ugly…but we would do better being above those moving average lines. Hopefully we can get back up above that red and blue which will show support to lower rates.


Listen, I don’t let Jackson watch people dying in movies or video games. Lord knows he will have enough time to find out how stupid humans are in this world. But at the same time, we cannot just hide our heads in the sand either. We need to look through everything. My coach and good friend, AJ Monte, talks about praying for the gift of discernment. I do it daily…and I suggest you do it. I know Jackson will be doing it…as soon as he can learn the big words.

 

What doesn’t kill us, makes us stronger.


Tim

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