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Global ‘Game Of Chicken’ Continues – MOAB >> NFP

Global ‘Game Of Chicken’ Continues – MOAB >> NFP

Today we will hit two topics, NPF and MOAB.

Let’s Start with NFP

About as good as it gets for the economy, not so good for Fed cuts.

Not only were the headline jobs better than the top estimates on Bloomberg (303k jobs). We also revised prior job reports up by 22k.

Wages are doing reasonably, with monthly wages coming in 0.3%.

What is most impressive to me is the unemployment rate coming down to 3.8%. That occurred while participation rate increased nicely. At 62.7%, it is just a smidge below the post covid high of 62.8%. The Household Survey (which is used for unemployment) added 498k jobs!

Definitely not “goldilocks” for the Fed, but good for the economy.

  • Yields should rise a bit and curves should be less inverted.
  • Stocks should probably react slightly negatively to the report as yields rise. But offsetting that yield rise is the sheer strength of the economy and the fact that the consumer should be in good shape.

What Does MOAB Have to do with Anything?

Nothing and everything. MOAB or Mother Of All Bombs isn’t front and center but Escalation and Expansion is. Thursday’s big drop in stocks was precipitated by fears that Iran was preparing to attack Israel. Part of why stocks were higher overnight and are still strong post NFP is because nothing happened overnight in terms of escalation and expansion (you can see that in oil too, which is hovering around unchanged).

We dealt with our thoughts on Hedging Geopolitical Risk at the start of the year and remain convinced of two things:

  • Long energy and energy stocks is the best hedge, since we like that sector already for a variety of reasons, and the next potential shoe to drop, would be cracking down on Iran’s 3.5 million barrels of oil being sold daily.

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Olduvai IV: Courage
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Olduvai II: Exodus
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