October 7, 2023, 10:38 am EDT
Strong Job Markets, Good or Bad ?
September Non-farm payroll of 336K of job increase shocked the stock market yesterday. This number is nearly double the estimation of 170K. The question is whether this a good news or bad news to the stock market.
There is no easy answer to this question because the stock market was also confused from the opening till the closing of the bell yesterday. Dow Jones tanked more than -200 points at the opening but reversed up +300 points and closed at +288 points.
The main reason to be bad news is the interest rate. Strong economy will force the Fed reserve to keep more rate hikes which will eventually terminate the rally. The Fed has no choice because a red-hot economy will speed up inflation pressure. This positive feedback loop makes the economy and currency into a spiral that ends up in chaos.
However, a strong job market makes more people with higher and stable income that could spend more on everything, from food, vacation, IPhone 15, etc. Therefore, it is a good news based on common sense.
Our viewpoint is that a strong job market is good for the short term. It makes for the look. In reality, higher rates are the real killer. Or, we should say high inflation is the terminator for both the economy and social stability.
We believe high inflation will make the bubble bigger and fall harder when it bursts.
But, before it bursts, it is still getting bigger. In summary, there could be a little good time ahead for the stock market until interest rates high enough or unacceptable point is reached.