Good Morning on this terrific Friday,

Today brought the monthly jobs report, the biggest data set of any month. I guess the headline should be ‘it could have been worse.’ Unfortunately, that is the myopic lens equities are trading with. U3 unemployment is almost 15% and that is only by the grace of an accounting loophole which included furloughed workers, despite receiving unemployment, as being employed. If those workers were characterized as being unemployed, the unemployment rate would be 20%. As a matter of fact, the U6 unemployment rate, which is a much more accurate measure of workers status, is 22%. How much worse does it get, or more importantly, how much worse could markets have expected for stocks to be rallying on this news? The Dow is up another 370 points.  This jobs report is the worst report in the history of job reports. The equity markets have blinders on continuing to believe that everything will be back to normal. There is no way to call the top (or the bottom), but this does feel close. Bonds are holding firm despite equities surging. It is not normal for bonds to rally when stocks rally. How can the market have a risk-on and risk-off attitude at the same time? Bonds always win this battle in the end. This is good news for rates and housing as low rates will spur sales as restrictions are being lifted.

Dan Rawitch shared some great insight below:

“Here is the thing, things will not be back to normal for a long time and things will get much worse prior to getting better. When you look deeply into the numbers you get an idea of just how tough it will be for the economy to stage a V recovery. The best we can hope for is a U recovery. Because the stock market is on its way to a V recovery, the means that the economy and stock markets are disconnected. It is too late for the stock market to have a U recovery to match the economy, so it looks to me that we are headed toward a W recovery and we have now formed the center of the W. Of course the Fed stimulus is a major driver in propping up the markets but this stimulus will not help business that are out of cash reopen. It will not help small businesses stay open as they learn that 25% of their customer base cannot show up to buy anything because they ran out of money during the shutdown. What is next is massive deflation as prices fall in a desperate attempt to try and get people to spend money. This is already happening in areas.”

Please remain safe and stay healthy.
Enjoy the weekend and make today great!