I had to reread this multiple times to imprint my understanding. A head scratcher, for sure. But this also carries the hallmarks of a well written, and thoughtful message. Thanks Fred, because in some small capacity (my limitation, not yours), my perceptions were stretched, and understanding grew.
Personally, I no longer care about the rich and their stock market. To me it’s all manipulation for profit, nothing more. There are at least two different economies in the USA. One for the rich and their stock market and the other, a reality of the not rich. Not enough money for daily necessities. And the wall st one cares nothing for the little people. Wasn’t there a Star Trek DS9 episode about where this kind of thing ends up? Why yes there was. So STAR trek, in its many versions, is more of a predictor of human behaviour not science fiction
A lot of people feel like there are two economies running side by side now... one where markets and asset prices matter, and another where people are just trying to afford groceries, rent, and gas.
And you nailed something important: markets often react to things that feel completely disconnected from everyday life.
Strong jobs report? People think, “Great news.”
Wall Street thinks, “Uh-oh… rates might stay high.”
That disconnect is exactly why so many people feel the system is built for somebody else.
And yes 😄… Star Trek has an annoying habit of being less science fiction and more “warning label for humanity.”
The older I get, the more some of those episodes feel less like entertainment and more like somebody quietly whispering... “You might want to pay attention to where this road goes.”
Fred, excellent economic summary, and hitting the contradictory economic nail right on the head.
This "too much of a good thing" is a problem for Canada, too, for largely the same reasons. Our super-good job report just released is (proportionately) even larger than the USA's. The only mitigating factor is that due to dependency on USA markets, increased jobs is more necessary than the related interest rate problem (for now). But that's why Canada's TSX also fell on the news -- Canadian recovery is also highly dependent upon lower interest rates.
The current AI “bubble” is maintained mostly by cheap money
As inflation related to the gulf war gets steeper, that money is going to get progressively more expensive
This goes on long enough, you get a triple-tap:
The broad economy suffers from inflation and supply chain disruption hitting people at the store and gas pump. This means either stable or higher central bank rates, depending on country
The US markets getting hit with both oil futures repricing to reflect spot prices as the various SPRs run low and increasing interest rates
All of this forcing bond yields higher still, risking the bond market as a whole, particularly in dollar-denominated bonds
I agree! Have always had a curious mind- a need to make sure I’m critically informed. Joining SubStack a month ago has been a game changing experience- has been seamless in finding my people
Great column Fred, it was quite a surprise that the markets reacted to the positive job numbers the way it did, and you do a great job of pointing out why that happened. There is one point that you did not mention that I also found interesting.
Most people are aware that Trump, Musk, and their armies of minions fired most of the people that maintained and reported the labour numbers, many with 20 years of experience, and replaced them with lackey sycophants.
Many economists believe that the good labour report was a fictional number made up by Trump to make it look like his tariffs and other horrible moves had created a flood of hiring. The real number is believed to be either a minimal gain or even a loss of jobs. This was just another factor in the response to the report.
I had to reread this multiple times to imprint my understanding. A head scratcher, for sure. But this also carries the hallmarks of a well written, and thoughtful message. Thanks Fred, because in some small capacity (my limitation, not yours), my perceptions were stretched, and understanding grew.
Haha… I’ll take that, Pete 😄
And trust me... if you had to reread it a couple of times, you’re not alone.
This one is a bit of an economic head-scratcher because we’re living in a weird moment where strong news suddenly acts like bad news.
But you did exactly the right thing... slowed down, thought it through, and wrestled with it a bit.
Appreciate the kind words...
and if your understanding stretched a little, then the article did its job.
Personally, I no longer care about the rich and their stock market. To me it’s all manipulation for profit, nothing more. There are at least two different economies in the USA. One for the rich and their stock market and the other, a reality of the not rich. Not enough money for daily necessities. And the wall st one cares nothing for the little people. Wasn’t there a Star Trek DS9 episode about where this kind of thing ends up? Why yes there was. So STAR trek, in its many versions, is more of a predictor of human behaviour not science fiction
You’re not wrong to see that divide, Brian.
A lot of people feel like there are two economies running side by side now... one where markets and asset prices matter, and another where people are just trying to afford groceries, rent, and gas.
And you nailed something important: markets often react to things that feel completely disconnected from everyday life.
Strong jobs report? People think, “Great news.”
Wall Street thinks, “Uh-oh… rates might stay high.”
That disconnect is exactly why so many people feel the system is built for somebody else.
And yes 😄… Star Trek has an annoying habit of being less science fiction and more “warning label for humanity.”
The older I get, the more some of those episodes feel less like entertainment and more like somebody quietly whispering... “You might want to pay attention to where this road goes.”
Fred, excellent economic summary, and hitting the contradictory economic nail right on the head.
This "too much of a good thing" is a problem for Canada, too, for largely the same reasons. Our super-good job report just released is (proportionately) even larger than the USA's. The only mitigating factor is that due to dependency on USA markets, increased jobs is more necessary than the related interest rate problem (for now). But that's why Canada's TSX also fell on the news -- Canadian recovery is also highly dependent upon lower interest rates.
Yahhh
The current AI “bubble” is maintained mostly by cheap money
As inflation related to the gulf war gets steeper, that money is going to get progressively more expensive
This goes on long enough, you get a triple-tap:
The broad economy suffers from inflation and supply chain disruption hitting people at the store and gas pump. This means either stable or higher central bank rates, depending on country
The US markets getting hit with both oil futures repricing to reflect spot prices as the various SPRs run low and increasing interest rates
All of this forcing bond yields higher still, risking the bond market as a whole, particularly in dollar-denominated bonds
Interesting times 🤷♂️🤦♂️🤷♂️
Good point, Earl.
The part people keep missing is that this isn’t just a stock market wobble anymore.
Cheap money helped inflate a lot of today’s AI and tech valuations.
If inflation stays sticky and oil keeps climbing, borrowing gets more expensive... and suddenly the math behind all that growth gets a lot tougher.
That “triple-tap” you described is exactly the concern...
Higher prices → higher rates → higher borrowing costs.
And if bond markets start getting nervous too?
That’s when things stop being “market volatility” and start becoming something much bigger.
Interesting times indeed… and not necessarily in the fun way 🤷♂️🇨🇦
Thanks Fred - I subscribe to House of El (she is has taught me much) but your summary was much clearer. Think I do best with printed word🙂
Thanks Shelley... and that actually means a lot. 😊
Sounds like we’re wired the same way.
Sometimes hearing it is good… but seeing it written out lets the pieces click together better.
Glad I could help make a messy story easier to follow.
This stuff gets complicated fast...
and frankly, when “good news crashes markets,” most people deserve a plain-English translation. 🙂
I agree! Have always had a curious mind- a need to make sure I’m critically informed. Joining SubStack a month ago has been a game changing experience- has been seamless in finding my people
Great column Fred, it was quite a surprise that the markets reacted to the positive job numbers the way it did, and you do a great job of pointing out why that happened. There is one point that you did not mention that I also found interesting.
Most people are aware that Trump, Musk, and their armies of minions fired most of the people that maintained and reported the labour numbers, many with 20 years of experience, and replaced them with lackey sycophants.
Many economists believe that the good labour report was a fictional number made up by Trump to make it look like his tariffs and other horrible moves had created a flood of hiring. The real number is believed to be either a minimal gain or even a loss of jobs. This was just another factor in the response to the report.