The Jobs report was out this morning. Growth was strong in Mar (payrolls up 303k, unemployment down to 3.8%). Lots under the hood, though, as hiring was concentrated in acyclical industries (hc, gov, construction), unemployment duration extended (meaning that there is a skill mismatch), and black workers had a high unemployment rate at 6.4%. Markets are up but gains dampened after the report. Yields are up, obviously, as investors doubt a June rate cut. The Fed probably has mixed feelings and would rather sit and wait for more data while they watch their friends across the pond start cutting first. Kashkari floating the idea of 0 rate cuts. The market is not ready for that. But, guess what that would mean? A strong economy, so is wishing for that so bad?
Who’s the fairest in EM? Everyone was selling China and buying India last year. Folks have started shifting back this year, given Beijing’s support for markets, recent economic green shoots (e.g., solid manufacturing PMI), and valuation deltas. HSBC is out with a note more favorable to China. Of course, the real estate issues and deflationary pressures are sticking points for some—and they point to Modi having a 3rd term as a stabilizer for India. We think you shouldn’t ignore either.
Whoever you support around the world, the bottom line is that the market risks from geopolitical tensions are significantly higher than a month ago. Energy prices moving up on the back of these tensions (plus supply mgmt) is no surprise (Brent >$90). The VIX moved up a few points to 16 and change, and protection became more expensive (to note, we flagged this in the last 2 weeks) as folks realized they didn’t have any.
Forget the politics—it’s economics. JPM is out with a piece on immigration. Where are most unauthorized immigrants from? South America, Central America, and Mexico. Where do new immigrants go? FL, CA, TX, NY receive 50% of folks. What jobs do they take? Construction, food services, and accommodations—with much lower wages.
Money market assets are at a new high in 3 mo, per BBG. Instead of putting on shorts, it can make sense to hold cash for a guaranteed nice yield.
I never thought Tesla would be blue light special’ing their cars this much. One of the problems is that their production has been higher than sales for 7 of the last 8 quarters. A recent study showed that the ave price of an EV (not just Tesla’s) fell 31.8% in the past year, versus 3.6% for regular cars. With 3 teenagers that will be driving by the end of this year, I never thought I would look to buy a used brand name EV for them, but maybe that’s the value play…
