• The employment report topped economists’ projections once again.
  • Part-time employment has surged, while full-time employment has declined in recent months.
  • Job gains continue to be concentrated in three sectors: Leisure and Hospitality, Healthcare, and Government (mostly state and local government). Excluding these sectors, job growth has been tepid.
  • This chart employs dual y-axis scales to illustrate the divergence between the overall jobs trend and the trend excluding these three sectors.

 

 

  • The unemployment rate among African Americans rose sharply.

 

 

  • The market no longer sees three Fed rate reductions this year, with the probability of a June rate cut tumbling after the jobs report.

 

 

  • Credit card debt has continued to climb, …

 

 

  • The average interest rate on credit card accounts remains near 23%.

 

 

  • The average rate for a 5-year auto loan has now surpassed 8%.

 

 

  • US households are growing more concerned about the possibility of job loss.
  • Furthermore, they are less confident about securing alternative employment if needed.

 

 

  • The NFIB’s small business sentiment index hit its lowest level since 2012, …

 

 

  • The index of hiring plans continues to sink, which signals a slowdown in US payrolls growth this quarter.

 

 

  • The PPI data signals a pickup in the rate of food inflation.

 

 

  • The March CPI report exceeded expectations, suggesting that inflation remains sticky and achieving a 2% rate may take longer than many economists initially projected.

 

 

  • – Headline CPI (monthly changes and contributions):
  • The market is now pricing only 41 bps of Fed rate cuts this year, …

 

 

  • The probability of a Fed rate cut in June has collapsed. Will we see any rate reductions at all this summer?
  • Treasury yields surged, with the 2-year rate nearing 5%.

 

 

  • Equities retreated.

 

 

  • The PPI report showed some cooling in wholesale price gains. The trade services PPI, which generally reflects business markups, showed an increase in March, indicating that companies are successfully maintaining their profit margins. A milder PPI report led Nomura to revise down their estimate for the March core PCE inflation. Nonetheless, the Fed’s preferred indicator is expected to show an increase from February. . Elevated consumer inflation has led Deutsche Bank to shift their forecast for the first Fed rate cut to December.
  • US mortgage rates hit the highest level since November.

 

 

Market Data

 

  • The stock market continues to ignore the ongoing pullback in rate cut expectations.

 

 

  • The global supply of equities is shrinking, as share buybacks outpace equity offerings.

 

 

  • Earnings downgrades going into this season have been slightly smaller than usual.

 

 

  • Downgrades have been broad-based outside of tech.
  • US equity market concentration has reached extreme levels.

 

 

  • The rally has been partly driven by expectations of Fed rate cuts, many of which are no longer anticipated.

 

 

 

  • High-dividend stocks are now much more exposed to rates than the S&P 500.

 

 

  • As a result, we are seeing substantial underperformance for high-dividend sectors.

 

 

  • Dividend growers are also underperforming.

 

 

  • Here are some examples.

    – Utilities:

 

 

Source: BofA Global Research

 

– Telecoms:

 

 

– REITs:

 

 

Great Quotes

 

“I’m at that age where my back goes out more than I do.” (Phyllis Diller)

 

Picture of the Week

 

The eclipse

 

 

 

All content is the opinion of Brian Decker