What Happened:  The US added 272k jobs in May, well above expectations for 190k. In a head scratcher, despite the consistent higher than anticipated job additions, the unemployment rate jumped to 4%, the highest level since 2022.

 

What Does it Mean?

Jobs data remains hot, which may indicate sticky inflationary pressure and therefore further delay in interest rate reductions. Immediately following the news release, the 10 year treasury yield jumped from 4.3% to 4.4%. While this move may not seem large, if you see the chart of the actual 10-year note below, you can tell what a dramatic move this was.

 

Charles Schwab Chart / Treasury Note / June 07, 2024

 

Why Do We Care? 

For the bull market to continue it is our belief that eventually gains seen in big cap technology must spread to other areas such as small capitalized companies. At the time of this writing the S&P 500 is now up over 12% for the year while the Small Cap Index as represented by the ETF: IWM, is flat and close to ticking into the red. This diversion has been in place for quite some time now and from our view has presented a unique opportunity. That said, each time we see inflationary data hotter than anticipated, this gap widens and threatens our general thesis as a whole.

 

Our view continues to be that the backdrop of the general economy is in fact slowing and despite hot jobs data, the Fed is already late to the rate reduction phase. Next week we will have Consumer Price Index (CPI) data and the June Fed meeting. While we do not anticipate any rate changes either way, we believe the data from the CPI and subsequent press conference from Jerome Powell will  direct markets for at least the short term. Nonetheless, it should be an interesting week.

 

In Other News: I’m very excited to announce a new Podcast I have the opportunity to participate in. Stock Market Investing with Quint Tatro & Mike Frazier aired its first episode this past week and if you’re interested in a deeper dive on markets, I hope you will give it a listen on Apple Podcasts or Spotify.

 

Mike Frazier runs a very similar firm to Joule based in Northern California. They too joined the Bluespring Wealth Partners family a few years back and he has quickly become a wonderful colleague and friend. Mike and I look at markets and the economy in a very similar way and both bring more than 23 years of experience to the business. We’ll sit down once per week and chat markets and with the upcoming election we’ll certainly have lots to discuss.

 

Click HERE to watch the weekly video for the week.

 

Until next time

~ Quint

 

 

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