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The bulls are back thanks to the Fed, Treasury and positive data

The bulls are back thanks to the Fed, Treasury and positive data

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November 6, 2023 – 00:00

150,000 net new jobs were created in October. The unemployment rate rose by a tenth to 3.9%. It is a postcard of full occupation, healthy, without overheating.

The planets aligned for the most auspicious sidereal season, after Halloween, at the end of May. ¡Open the field as the bull market is reborn on Wall Street, The bulls rush into the wilderness! It’s the best ever, and it looked like the worst until just yesterday. It was not Jerome Powell who gave the order to start. Yes, Janet Yellen, his predecessor at the Fed, today leads the Treasury Department. The point is that the pause on short-term interest rates has been extended. Existential uncertainties were about the fate of long-term interest rates and the size – and composition – of quarterly sovereign debt deposits. And Yellen did not want to repeat the mistake she made three months ago. He cut the offer, played it safe, and Thus encouraging the first relaxation. Then he came Powell With a modern tone. He mentioned the gallows in the house of the hanged and criticized it without hesitation. He said that financial conditions have become very tight, but not in the correct expectation of monetary policy. Maybe (we say) Yellen made a debt management mistake, and is excessively forced to react to the time premium between short and long rates. What more could you ask for? Attorney Powell calls for peace with interest rates, but not just with federal funds But throughout the entire yield curve. This is music to the markets ears, as it were Tony Bennett and Lady Gaga will sing a surprise duet.

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I needed to listen to the orchestra. The employment report had to be amended so as not to cause controversy. And so it happened. 150,000 net new jobs were created in October. The unemployment rate rose by a tenth to 3.9%.. It’s a postcard Full occupancyHealthy, without overheating. Strikes lost 48,000 jobs that will be restored. Reviewing the statistics was more interesting: 101 thousand. Salary increases They are slowing down month by month. This is what the doctor ordered: As inflation declines faster, It increases the real salary and contributes to alleviating the excess demand for labor.

Nothing seems more harmonious than a jump in productivity (labor margin): 4.7% in the third quarter. “It’s the best of both worlds,” the governor noted. Chris WallerStubborn Falcon, a few weeks ago. Could this be true, he wondered? This is how it looks: Corporate sector product growth by 5.9% (Remember: GDP is 4.9%) and achieved this with a small increase 1.1% working hours. This is music for everyone, including the Fed. Workers’ compensation rose sharply: 3.9%. But less than productive. As a result, labor costs decreased by 0.8% per unit of product. It’s a good reason for that Understand why inflation is falling even though the real economy is not respecting the central bank’s austerity instructions. These are numbers that show that there is no recession (as feared), that it is not necessary to create one for prices to calm down, and that it is a mistake to rush into hard data without examining the details first. Last, phone to The bond market is more than Powell and his people.

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Wall Street, congratulations. It’s been the perfect week, Best of 2023. The bull market has bounced back after the recent 10% correction. He resoundingly re-verified his credentials. The long saga of interest rates, which was bound to be abused, has come to an end. After good offices Paul WellenTen-year bonds reduced their yields by half a point from their highest levels. It decreased from 5.02% to just over 4.50%.. And summer broke out. Or at least the stock market’s rise this season. On five wheels, five reinforcements. The Standard & Poor’s 500 rose 5.85%. The Russell 2000, a compendium of small-cap stocks, lost 7.56% in the price storm. Implied volatility for stocks – as measured by the VIX index – fell sharply -30% during the week – to close below level 15 and open the horizon. “Nothing seems more convenient than indicators.”Technicians“. And it’s all laden with pessimism in the opposite direction. It doesn’t matter what you look at. Positioning, recent flows, broken averages. Or cash available for investment. ¿Free stone for everyone? Like any level whose slope suddenly changes, it is susceptible to exaggeration. That’s why it’s good Remember, the best of both worlds is not perfect. It can cause insomnia as we have already seen. Or, as we will see, if data is not only moderated, but… It weakens and does so very quickly.

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