Leaping To The Wrong Conclusion

Leaping to the wrong conclusion is a daily event the stock market.

Friday’s Jobs report provided a quintessential example. A retreat to the Covid-19 playbook provides a comedy of errors ending in new all-time highs for both the Dow Jones Industrials and S&P 500, with the Nasdaq composite up on the day but down 1.5% on the week.

When the curtain’s pulled back, the Wizard (A.K.A. Cathie Wood) should be owning Old Navy instead of Armani (by charter she cannot).

Friday’s jobs report miss was a doozy  … estimated 1,000,000 new jobs, actual 266,000. Yes, the prediction business is tough. Yes, the economy is doing great. How could the number miss by so much from the venerable economic community’s (these guys are generally not a helpful resource in the investment process) learned guess? The initial headline from CNBC was, “Dow futures (which were up 200 points) turn negative, Nasdaq futures jump as yields dive on jobs report.” The link I’ve attached is to a corrected post talking about how well the market ended up Friday.

Could it be these minions were failing to account for a policy error in the American Rescue Plan Act of 2021 signed into law in March and the provisions having to do with extended unemployment benefits? 

However the market’s quickly jumped-to conclusion (by the computers and some real live market participants) was that this was a sign of unforeseen economic weakness. Sell first, ask questions later … all signs of a very skittish market.

Mini-flight to safety … Returning to the Covid19 Playbook

Market reaction to this news was bifurcated: Buy safety assets – bonds, gold, Bitcoin (?) and new economy/innovation – and sell risk (all other common stocks). The yield on the 10-year US Treasury fell 9 basis points to 1.47% (closing 5/7 at 1.58%). Gold spiked.. Bitcoin jumped $2400 (not sure why this might be considered a safe haven by some). And true to the ‘Covid playbook’ the Nasdaq composite index jumped 300 points. Ta Da … the new economy and innovation … a sector where the sun always shines and valuations are irrelevant.

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Disclaimer: The information presented here represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain ...

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