- Moving the markets
We all know the saying “when good news is bad news.” Well, today we got a reminder of what that means. ADP announced that private sector jobs jumped by 497k in June, smashing expectations and marking the biggest monthly gain since July 2022. That sounds like good news, right? Wrong.
Because this report is not very reliable and often differs from the official payroll data that comes out tomorrow. Economists are expecting a more modest gain of 240k jobs for June, which would still be lower than May’s impressive number of 339k. But even if they are right, the jobs market is still the strongest it has been since 2012, unless some nasty revisions come along.
So why is this bad news? Because traders think this means the Fed will keep raising interest rates to cool down the economy and prevent inflation. They are now almost certain that we will see another hike in July, the fourth one this year. And they expect more to come.
This sent bond yields soaring, with the 10-year breaking above 4% and the 2-year hitting its highest level since July 2006. This also pushed up mortgage rates, with the 30-year reaching its highest since November. Ouch.
Meanwhile, we also learned that job openings dropped by 500k in May, even though more people quit their jobs. And initial claims for unemployment benefits bounced back up after a holiday-related dip. Not so good news after all.
The stock market didn’t like any of this and closed in the red across the board. Small caps took the biggest hit and got hammered hard. The dollar had a brief rally but then gave up its gains and ended lower. Gold also suffered and slid towards last week’s lows.
But I’m not worried about gold, because it’s a long-term hedge against inflation. And inflation will come eventually, trust me. Why else would central banks be buying so much gold? They bought over 1,100 tons of it in 2022, the most on record since 1950.
Think about that.
- “Buy” Cycle Suggestions
The current Buy cycle began on 12/1/2022, and I gave you some ETF tips based on my StatSheet back then. But if you joined me later, you might want to check out the latest StatSheet, which I update and post every Thursday at 6:30 pm PST.
You should also think about how much risk you can handle when picking your ETFs. If you are more cautious, you might want to go for the ones in the middle of the M-Index rankings. And if you don’t want to go all in, you can start with a 33% exposure and see how it goes.
We are in a crazy time, with the economy going downhill and some earnings taking a hit. That will eventually drag down stock prices too. So, in my advisor’s practice, we are looking for some value, growth and dividend ETFs that can weather the storm. And of course, gold is always a good friend.
Whatever you invest in, don’t forget to use a trailing sell stop of 8-12% to protect yourself from big losses.
- Trend Tracking Indexes (TTIs)
The markets suffered a sharp sell-off as the old dilemma of “good news is bad news” returned. The markets closed lower across the board, and our TTIs also declined, especially the International one. But we are still in bullish territory, and I will monitor closely if this was a one-off event or the start of a correction.
This is how we closed 07/6/2023:
Domestic TTI: +3.88% above its M/A (prior close +4.73%)—Buy signal effective 12/1/2022.
International TTI: +5.59% above its M/A (prior close +7.28%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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