019: Jobs Report Prelude 07-06-23

Are you ready to unravel the mystery behind the swift market movements influenced by a surprising ADP payroll report? Let's join Megan Hornemann, our Chief Investment Officer at Verdon's Capital Advisors, as she expertly unpacks the economic turbulence driven by an unexpected creation of 497,000 jobs instead of the predicted 225,000. This episode is all about exploring the correlation between job reports and market fluctuations and how they're steering the Federal Reserve's next move.

While you might be elated over the great job market headlines, Megan brings a fresh perspective by reminding us that these figures are, after all, a lagging indicator. She provides clarity on the impact of these developments on both the equity and bond markets. Expect to gain insights on how to navigate the high valuations and the fading rally of the second quarter. We welcome your queries and comments as we stir up a intriguing discussion on these market changes. Stay tuned as we come back with more analysis after the big report tomorrow.

Hello, this is Megan Hornemann, the Chief Investment Officer for Verdon's Capital Advisors, and we're coming to you today with Markets. With Megan, it's been a big market moving day. This is a big week for reports on the employment market and today we got a surprising report out of ADP payroll. The expectation was for the addition of about 225,000 jobs and the report came out with the addition of 497,000 jobs. So why is this a big deal? Because this is the lead up to the monthly unemployment and labor market report that we'll get and we'll be back tomorrow to talk about it.

But because of the big beat there on that initial report, we've seen the market selling off and the reason they're selling off is because the expectation is the Fed is not done. They've told us that at their prior meeting we had some more hawkish rhetoric out of a Federal Reserve voting official Today as well, that the Fed may not be done. So the high valuations, the big rally that we saw in the second quarter it's starting to lose some steam because of that. But it's not just the equity market, it's also the bond market. You're seeing two-year yields now at levels that we haven't seen in many years. You're seeing the 10-year yield now back above 4%. So interest rates are starting to reflect that. The Fed may have to raise rates, not once, but maybe twice more this year. So you're going to read the headlines that the job market is doing great.

Yes, these numbers are good. Remember, it's a lagging indicator. It hasn't changed our view on the economic outlook for the rest of this year or the first half of next year. We'll continue to look at these reports and we'll be back after the big report tomorrow to keep some more insight on that. If you have any questions or comments, please feel free to reach out at podcasts at burdenscom. Thank you.