Video by Corns Investing via YouTube
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So week 1 in 2024 has got on to a red start on the back of the latest nonfarm payroll data for the US, which showed that that employers added 216,000 jobs for December, up from Novemberβs 173,000. The unemployment rate also held steady at 3.7% making the ratio of available jobs to available workers remaining at 1.4:1, which keeps an upward pressure on wages. But while that number continues to trend lower, its pace of decline is slower than the Fed had anticipated.
So what this really means is that the Fed is unlikely to risk inflation reversing back by reducing interest rates too soon. Which means we are going to be in a high interest rate environment for some time until that labour market cools down, which is bad for some stocks you may be holding as their costs of borrowing to drive growth & earnings would remain higher for some time. Thatβs why the stock market has started on the back foot this year with week 1 being in the red.
So in summary a strong labor market means financial conditions remain tight for the near future, which means pressure on stock market earnings and the multiple investors are willing to pay for those earnings. It also puts a damper on other long-dated risk assets like crypto. π§―
By this time next month, weβll have another set of inflation and employment data, and the market will likely come to a definitive conclusion on its rate cut expectations. So some recurring milestones there to be aware of as we head further into the year.
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