October 9, 2019

Today is Yom Kippur, the Jewish holiday for a Day of Atonement. We historically have seen lighter market volumes on this holiday.


US-China Trade remains the story as today’s headlines are optimistic and push markets higher. China has said they are open to a partial trade deal if Trump eases Tariff threats, and the markets have responded positively.


Our outlook remains the same, showing flat markets going nowhere that could resolve with blastoffs. You have heard me talk about cash build-up, and that is what we see here. Cash has been building for 20 months now and will sooner or later be deployed back into equities. The markets have gone nowhere for 12 months and yet hover near all-time highs. This has only been seen three times since WWII, and a massive upside breakout resolved 3 of 3 times—avg gain 51%. Thus, we see stocks seeing an upside breakout in the next few months, coinciding with a bottoming of PMIs. The GM strike ending also strengthens this case.


What could go wrong? Investors’ confidence is weak due to impeachment talks, trade uncertainty market volatility. This could result in a self-fulfilling contraction.

The Conference Board’s Employment Trends Index (ETI) ticked up 0.2% in September. Six of its eight components made positive contributions, led by fewer people saying jobs were hard to get. The index was also up 0.7% y/y, but momentum has dwindled over the past year. This suggests a slower pace of job creation in the near-term, although enough to keep the labor market tight. Our analysis shows that it is also consistent with slower real GDP growth by yearend.

  • Helped by a 22,000 boost from non-Census government jobs, nonfarm payrolls expanded by 136,000 in September, below the consensus of 145,000.
  • The 114,000 increase in the private sector was above our forecast of 80,000.
  • Additionally, the prior two months were revised up by a respectable 45,000 jobs, indicating more strength than previously estimated.
  • The unemployment rate tumbled to 3.5% from 3.7%, the lowest level since December 1969.
  • Economists had expected it to remain at 3.7%, although we saw a risk of it dropping to 3.6%.
  • Average hourly earnings were flat, below the consensus of 0.2%, causing the y/y change to fall to 2.9% from 3.2%.
  • There was enough weakness in survey data this week to allow the Fed to tee up another rate cut for the end of October.

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