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Cherry-Picking. · ANGLES.

• 0:01
  SPEAKER_00: Cherry picking, my weekly market review, June 9th, 2024.
• 0:06
  SPEAKER_00: Last week provided a perfect example of how you can create any narrative you like
• 0:11
  SPEAKER_00: simply by cherry picking data.
• 0:14
  SPEAKER_00: The glass is half full crowd needed to look no further than central banks around
• 0:19
  SPEAKER_00: the world last week starting the interest rate cutting cycle.
• 0:22
  SPEAKER_00: Job openings data showing an orderly resumption of pre-COVID labor market normality,
• 0:28
  SPEAKER_00: backed up by stats showing that unemployment at an economically ideal 4%,
• 0:35
  SPEAKER_00: and over two thirds of stocks now trading above their 200 day moving average.
• 0:40
  SPEAKER_00: Team Trouble could instead point to a scorching out-of-control jobs report last
• 0:46
  SPEAKER_00: week that is wrecking the Fed's plans to lower interest rates anytime soon in a
• 0:51
  SPEAKER_00: stagnating economy.
• 0:53
  SPEAKER_00: Whispers of the need to raise rates instead of cutting them growing louder all the
• 0:57
  SPEAKER_00: time and less than 50% of stocks now trading above their 50-day moving average.
• 1:04
  SPEAKER_00: Stocks fell early on Monday, helped lower by a report showing that U.S.
• 1:08
  SPEAKER_00: factory activity shrank at a much faster pace than expected.
• 1:11
  SPEAKER_00: Indeed, manufacturing output appears to have come close to stagnating.
• 1:16
  SPEAKER_00: As the session wore on,
• 1:17
  SPEAKER_00: however,
• 1:18
  SPEAKER_00: prices slowly clawed their way back,
• 1:20
  SPEAKER_00: and a last gasp surge meant that the S&P 500 actually finished a day fractionally higher.
• 1:26
  SPEAKER_00: On Tuesday morning,
• 1:27
  SPEAKER_00: we learned that from the latest job openings and labor turnover survey jolts that
• 1:33
  SPEAKER_00: the number of job openings in the U.S.
• 1:35
  SPEAKER_00: fell to 8.06 million.
• 1:37
  SPEAKER_00: That's 1.8 million less than a year ago and its lowest level in over three years,
• 1:43
  SPEAKER_00: implying a continuation of a Fed-friendly slow motion and relatively low pain call
• 1:48
  SPEAKER_00: down in the labor market.
• 1:51
  SPEAKER_00: Once upon a time,
• 1:52
  SPEAKER_00: not so long ago,
• 1:53
  SPEAKER_00: stocks might have been expected to immediately shift higher on the back of such data,
• 1:58
  SPEAKER_00: but it was met with an indifferent shrug by Wall Street.
• 2:01
  SPEAKER_00: Stock prices initially drifted a little lower,
• 2:04
  SPEAKER_00: then perked up a bit after lunch,
• 2:05
  SPEAKER_00: but there was little conviction either way,
• 2:08
  SPEAKER_00: and the market's attention began to turn to Friday's main event,
• 2:11
  SPEAKER_00: the jobs report.
• 2:13
  SPEAKER_00: There was a lot of green on the screen on Wednesday,
• 2:16
  SPEAKER_00: partly as a bit of a delayed reaction to Tuesday's pro-Fed interest rate cut jolts data,
• 2:21
  SPEAKER_00: and partly on the back of a rather surprising actual rate cut from the Bank of Canada,
• 2:27
  SPEAKER_00: the first of the big global central banks to start an interest rate reduction cycle.
• 2:33
  SPEAKER_00: Business borrowing conditions continued easing as Treasury interest rates fell for
• 2:37
  SPEAKER_00: the fifth day in a row,
• 2:38
  SPEAKER_00: and stocks sprang sharply back into all-time record high territory again for both
• 2:44
  SPEAKER_00: the S&P 500 and the Nasdaq.
• 2:47
  SPEAKER_00: On Thursday morning,
• 2:48
  SPEAKER_00: the European Central Bank followed the Bank of Canada's lead with its own widely
• 2:53
  SPEAKER_00: anticipated first interest rate cut since 2019 to 3.75%,
• 2:59
  SPEAKER_00: widening the margin by which it's lower than the Fed's rate to 1.625%.
• 3:03
  SPEAKER_00: U.S.
• 3:03
  SPEAKER_00: stock prices returned to snooze mode ahead of the important jobs data the next day
• 3:11
  SPEAKER_00: and basically went nowhere the entire session.
• 3:15
  SPEAKER_00: On Friday morning, the jobs report proved to be a confusing mess for the Fed.
• 3:21
  SPEAKER_00: Payroll smashed through estimates with a jaw-dropping 272,000 new jobs created in May,
• 3:25
  SPEAKER_00: against an estimate of 180,000.
• 3:25
  SPEAKER_00: But the unemployment rate rose to 4% for the first time since late 2021.
• 3:29
  SPEAKER_00: The average estimate had been 3.9%.
• 3:39
  SPEAKER_00: The rate of annual wage growth continued to increase by a higher than expected 0.4%
• 3:46
  SPEAKER_00: in May to 4.1% annualized.
• 3:50
  SPEAKER_00: This all raised questions about whether the Fed's interest rate policy is biting
• 3:55
  SPEAKER_00: hard enough in terms of its goal of cooling the labor market,
• 3:59
  SPEAKER_00: in turn handing a big I told you so to that still small but growing group
• 4:07
  SPEAKER_00: who see a scenario of the next Fed move having to be an increase rather than a cut in interest rates.
• 4:14
  SPEAKER_00: The last dregs of a market-driven probability of a rate cut in July evaporated completely,
• 4:20
  SPEAKER_00: and the likelihood of a rate cut before election fell below 50-50 for the first time.
• 4:27
  SPEAKER_00: Once again, the stock market did not react as one might have expected.
• 4:31
  SPEAKER_00: Instead of plunging,
• 4:32
  SPEAKER_00: it rather uncharacteristically took the report mostly in its stride,
• 4:36
  SPEAKER_00: remaining reasonably calm even though Treasury interest rates spiked back,
• 4:41
  SPEAKER_00: ending the session with relatively tame losses,
• 4:44
  SPEAKER_00: all things considered.
• 4:45
  SPEAKER_00: And the S&P 500 and the Nasdaq maintained their gains for the week.
• 4:53
  SPEAKER_00: The Q2 earnings season is all but over and the general sentiment is that things were fine.
• 4:59
  SPEAKER_00: However,
• 4:59
  SPEAKER_00: beyond the glitzy releases from the Fab Five,
• 5:02
  SPEAKER_00: you can find signs of froth if you're looking for them.
• 5:06
  SPEAKER_00: U.S.
• 5:07
  SPEAKER_00: public companies are the absolute best in the world at controlling costs and maintaining margins.
• 5:13
  SPEAKER_00: And it really was this superpower that caused Q2 to be regarded in a good light
• 5:18
  SPEAKER_00: rather than overwhelming evidence of solid aggregate demand.
• 5:24
  SPEAKER_00: Over the past few weeks,
• 5:25
  SPEAKER_00: we've seen numerous companies from multiple industries post disappointing results
• 5:29
  SPEAKER_00: and projections on a combination of underwhelming sales and margins.
• 5:34
  SPEAKER_00: The number of companies expressing concerns on earnings calls about reduced demand
• 5:39
  SPEAKER_00: or a more discerning consumer is rising quickly.
• 5:44
  SPEAKER_00: This,
• 5:44
  SPEAKER_00: of course,
• 5:45
  SPEAKER_00: feeds into the absolute biggest concern for financial markets,
• 5:49
  SPEAKER_00: a sudden sharp economic slowdown that has not in any way been factored in to where
• 5:55
  SPEAKER_00: stock prices currently sit.
• 5:58
  SPEAKER_00: None of this means that the S&P 500 can't run up another 5% to 10% if we get good
• 6:04
  SPEAKER_00: vibes from Jerome Powell this week after the do-nothing June Fed meeting.
• 6:09
  SPEAKER_00: Evidence that inflation has resumed its downward trajectory in the consumer price
• 6:14
  SPEAKER_00: index measure of retail inflation.
• 6:16
  SPEAKER_00: A drop in treasury yields and continued bottomless AI enthusiasm.
• 6:22
  SPEAKER_00: But the evidence of slowing growth is increasing on both the macro and micro economic fronts.
• 6:28
  SPEAKER_00: And I personally think markets are being a bit too complacent about