Good morning,
Today is Employment Report Day, typically one of the most important and closely watched macroeconomic releases each month. While the AI trade and inflation have been the primary drivers of stock and bond price movements recently, employment data still commands respect—perhaps even more so with less than two weeks remaining before Kevin Warsh’s first meeting as Fed Chair.
A solid report this morning would give the committee room to focus on other concerns, with inflation likely remaining at the top of that list. The data will be released at 8:30 a.m. ET. Unfortunately, I will be in a dentist’s chair at that exact moment, so nothing about the actual report will make its way into this Morning Note.
So far this week, the major equity indices have remained close to their respective starting lines. That does not mean markets have been quiet—just the opposite. Communication Services (NFLX, GOOG) and Consumer Discretionary (AMZN, TSLA) have been the primary drags on performance, while Energy, Financials, and Healthcare have provided offsetting strength. The result has been a healthy sector rotation that leaves the major indices little changed for the week.
The market has rallied ~20% from its late-March low, measured by the S&P 500. Moves of that magnitude are more commonly associated with the early stages of a new bull market emerging from recession—not with a mature bull market operating well into an economic cycle, as we are today.
As a result, there is no shortage of commentary focused on the age, concentration, and presumed unsustainability of our bull market. Psychologically, those concerns are understandable. Yet the market itself is not behaving as though the rally is nearing exhaustion. Until the market evidence suggests otherwise, we remain constructive on stocks.
Have a great weekend.
Be well,
Mike