Stronger-than-expected US jobs data, improving global cyclical activity data (i.e., PMIs), and favorable coverage on potential Ccovid-19 vaccines and treatments represent a favorable turn in the risk merry go round this week. And tas this positive news is currently tempering the seemingly endless negative views around the rapidly-rising new daily virus cases in the US.
After one has conducted a huge market deal has been conducted via the voice market, it's not uncommon for one party to express their confidence and ask their counterparty, "How are you left" ( minus the expletive), inferring an interest to buy or sell more market assets at that quoted price.
It feels like we’ are at that very same inflection point, but there are a few particularly salient market views emanating from the recent run of labor market trends that suggest the stock market bull run is far from over.
The FOMC is unlikely to turn less dovish, even if job growth remains strong. By alluding to yield curve caps in detail, the Fed is unambiguously trying to drive inflation expectations higher.
Higher inflation break- evens should be good for US equities, and negative for USD and suitable for gold – it’s , kind of the best of both worlds if you bought gold to hedge your stock market risk. Still, I think increasing inflation hedging is the top of book concern for most portfolios that remain underweight inflation hedge. Buy gold. B Buy EURUSD.
Although things were a bit whippy post-NFP, safe-havens currencies like the dollar are less attractive if the US labor market recovery turns becomes more self-sustaining.
The fast-improving job market is providing fantastic optics and could help US President Trump's re-election chances. Presumptive Democratic nominee, Joe Biden's increasing lead in the polls, chimed clearly with rising job losses and a building health crisis; a. A reversal in either of those trends should help Trump.
But my main takeaway is the fact the June employment report unambiguously signals that reducing social-distancing measures is ostensibly positive for the economy. Sso, even rolling back some of the re-opening is not that bad in the bigger scheme of things, at least over the medium termo into which arguably stock markets are leaning.
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower