NACHO time

Stellar run, but S&P 500 with Nasdaq entered NFPs with several non-confirmations in place – given the headline number (strong beat), it was impossible not to be bullish again, and concentrate on tech longs, that still brought more gains to clients.

Just the headline NFPs figure impressed – birth-death model firing on all cylinders, participation rate down, wage growth in real terms slowing, and U-6 unemployment up (this one is important as it shows the underemployed). Not falling apart, but no show of underlying strength. UoM consumer sentiment only completed the  picture with very lowcurrent conditions and consumer sentiment metrics – Americans haven‘t felt this gloomy, neither during coronavirus nor in 2008.

Stocks though couldn‘t care less about the „details“, Iran seizing oil tanker off the Gulf of Oman (and reportedly dumping its own oil off Kharg island) or more punishment promised for UAE. The Strait remains effectively closed, Iraq is offering heavily discounted oil (think $30 discount so as to keep exports flowing – you know that Kuwait barely exported anything the prior month) and while there are no actual shortages in the States, Americans bear the rising price burden too.

No demand destruction to speak of yet worldwide, and the question is what the Fed would do? Prevent that from happening by accommodative policy as in the corona years? If Kevin Warsh hearing (and market reaction – that was the latter half of Apr) is any clue, the expectation is not to see the same kind of reaction as Powell Fed as he would probably like to dissociate from that image. Whether it‘s though run in the Reaganesque sound(er) money style, that remains to be seen, pretty tall order the way I see it. This reckoning is though still far, far away.