What Happened: Initial Jobless Claims for the week reported to be 231,000 vs expectations for 215,000. Dow advances 330 points, edging closer to 40,000

 

What Does it Mean?

Each and every week folks file for unemployment giving economists and investors a real-time look at the Jobs market. While non-farm payrolls have been sticky, an anomaly we’ve addressed previously, initial jobless claims have notched a level not seen in more than 8-months. This data point suggests the economic picture is in-fact cooling and correlates well with the idea that inflationary pressure is also coming down quickly. These two items are required before the Federal Reserve considers rate reductions. Investors cheered this bad news buying up stocks, taking the Dow very close to all-time highs.

 

Why Do We Care? 

For months we’ve been relaying two main themes in our writing, videos and webinars. Our first theme has been the predominant and pervasive negativity we see and feel among general investors. Despite the stock market’s solid returns in 2023 and thus far in 2024, investors continue to stock-pile cash on the sidelines.

In our opinion, markets will not find a meaningful top until this fear of investing turns into a fear of missing out and pessimism is replaced by optimism. When this transpires, we will be looking to implement a much more cautious position and gladly reduce our risk as new investors enter for the final stages of the bull market.

The second theme we’ve been adhering to is that this movement off the sidelines will be sparked by a reduction in interest rates, thus no longer making cash an attractive place to be. For this to occur, the economic backdrop must continue to soften with inflation coming down. We suspect this will continue into year end and the election season giving bulls even more confidence to buy stocks. For now we remain quite bullish and will be re-evaluating in the future.  For now, it seems like the common theme is bad news is good for stocks and will continue to play out that way for some time.

 

Until next time

~ Quint

 

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