The S&P 500 hit a new all-time high today at 5,790.43. It may be just a coincidence but way back on October 9, 2007, the S&P 500 also hit a new high after the Fed cut rates by by 50bps to 4.75% on Sept. 18th.
Then on October 10th, 2007, the market started dropping and it didn’t stop for about 18 months.
But today the market is flying based on the September jobs report which came out last week and showed that the economy created 785,000 new government jobs, the second-largest monthly increase on record.
Government jobs also accounted for a staggering 85% increase in total payrolls in the household survey. According to these numbers, there are now 22.2 million government workers. Where do they put them all?
These new nonproductive hires pushed the unemployment rate down to 4.1%.
Algo Says Buy
The computers that run the stock market scrape the headlines and start buying. The TV pundits and Wall Street bros talk up their book and tell you to buy, buy, buy.
They don’t consider that these numbers are made up and will be revised down after the Presidential election. Heck, that’s weeks away.
Meanwhile, over four and a half million Americans are underemployed. The number of people working part-time but seeking full-time jumped by 4.6 million in September which is the second highest since the Covid.
The quit rate has also been dropping all year and is now at 1.9% down from 2.3% last year and 3% in 2022. This means that people are scared to leave their jobs because they may not find another one. They are hunkering down. They know hiring is getting more difficult.
These are recessionary levels. But the market only goes up.
People need to work because they are out of money. Check out this chart from Bravos Research showing that the savings rate has gone negative, something that also happened in 2007.
People spent all of their free government cheese, depleted their savings, and are now dumping it on their credit cards.
And guess what? They are paying an astronomical 23.4% in interest. The highest ever.
But sure, that half-a-point interest rate from the Fed helps out. Remember three weeks ago when everyone said the Fed would cut and mortgage rates would go down? There would be a booming housing market as pent-up demand and lower monthly payments would drive new buyers…
Well, that didn’t happen.
The Fed cut the rates it lends to banks and the banks raised the rates at which they lend to you. Mortgage rates went from 6.12% to 6.46%. All those people who were waiting to sell at 2021 prices got a cold dose of reality slapped right across the grill.
If you own stocks and houses you’ve been doing great.
But trees don’t grow to the sky. Underemployed people with no savings don’t buy overpriced houses or passively invest in their 401k. Toss in a $180 billion hurricane, a crashing Chinese stock market, a War in Iran, record U.S. debt, and the most expensive stock market ever in regards to market cap v GDP – and you have all the decoys and duck calls needed to lure a whole flock of black swans to your proverbial pond.
Party on Wayne,
Christian DeHaemer
Outsider Club
Quit rate:
https://tradingeconomics.com/united-states/job-quits-rate
https://www.outsiderclub.com/the-next-weight-loss-giant/
Call Noah:
https://www.outsiderclub.com/strikes-strikes-and-floods/
