April jobs report, plus big tech and 🧁 weekend sprinkles 🧁
April jobs report, plus big tech and 🧁 weekend sprinkles 🧁
The Sandbox Daily (5.3.2024)
Welcome, Sandbox friends.
Today’s Daily discusses:
April jobs report
big tech is the modern-day Hoover vacuum
weekend sprinkles
Busy weekend ahead with the 150th anniversary of the Kentucky Derby (mint julep anyone?), Berkshire Hathaway’s annual shareholders meeting, and Cinco de Mayo.
What are you most looking forward to?
Let’s dig in.
Markets in review
EQUITIES: Nasdaq 100 +1.99% | S&P 500 +1.26% | Dow +1.18% | Russell 2000 +0.97%
FIXED INCOME: Barclays Agg Bond +0.51% | High Yield +0.42% | 2yr UST 4.812% | 10yr UST 4.503%
COMMODITIES: Brent Crude -0.87% to $82.94/barrel. Gold +0.04% to $2,310.7/oz.
BITCOIN: +5.23% to $62,403
US DOLLAR INDEX: -0.24% to 105.047
CBOE EQUITY PUT/CALL RATIO: 0.73
VIX: -8.11% to 13.49
Quote of the day
“Pain is temporary. It may last a minute, or an hour, or a day, or a year, but eventually it will subside and something else will take its place. If I quit, however, it lasts forever.”
- Lance Armstrong
Jobs, jobs, jobs
It isn’t often the jobs report misses expectations. According to Bespoke Investment Group, only 3 of the prior 24 months saw jobs come in below the consensus estimate. As of today, we can make that 4 of 25.
Per this morning’s employment report from the Bureau of Labor Statistics (BLS), nonfarm payrolls showed U.S. employers added 175,000 jobs in April, firmly below the street estimate of 242,000 and the smallest gain in 6 months.
But it wasn’t all bad; in fact, from the market’s perspective, this was a goldilocks report.
April marked the 40th consecutive month of job gains – the 5th-longest period of employment expansion on record.
It’s also important to keep track of the 3-month trend (+242k) that helps reduce the month-to-month noise and distortions that accompany this jobs report, while also serving a reminder that we are adding jobs well above the pre-pandemic trend (+166k).
Meanwhile, the unemployment rate ticked up by 0.1% to a 2-year high of 3.9%, which sounds a bit scary on the surface – until we remind ourselves that April marked the 29th consecutive month that the nation’s jobless rate has been at or below 4%, the longest stretch in more than 50 years.
Elsewhere, average hourly earnings, where much of the attention has been focused, slowed to just +0.2% MoM and rising +3.9% YoY, the slowest pace since June 2021.
This is good news from the perspective of markets. Remember, higher wages increase the prospects of more inflation in the future which puts more pressure on the Fed to maintain their higher-for-longer message – not good for stocks that are expecting cuts.
Finally, the cohort in their prime working years (ages 25-54) who are employed relative to the population remains higher than pre-pandemic levels which is quite encouraging.
So that’s a lot of data and information – what does it all mean?
The labor market remains on strong footing, the tightness of the last two years is showing signs of easing, and in regards to markets and portfolios, likely keeps the Fed on track for a rate cut in the back half of 2024 (most likely in September).
Source: Ned Davis Research, Piper Sandler, Zero Hedge, Bloomberg, Sonu Varghese (Carson Group), Bespoke, Calculated Risk
Big Tech is the modern-day Hoover vacuum
Build it or buy it?
Companies striving to achieve the next growth engine or leg of efficiency face this question regularly.
When its Big Tech and your balance sheet is flush with cash – now earning 5%+ on risk-free T-bills – sometimes the easiest path forward is M&A.
Source: Chartr
Weekend sprinkles
Here are the ideas, sights, and sounds that caught my attention this week – perfect for quiet time over the weekend.
Books
Atul Gawande – The Checklist Manifesto (Amazon)
Blogs
No Mercy / No Malice – The Algebra of Wealth (Scott Galloway)
A Wealth of Common Sense – What’s the right savings rate? (Ben Carlson)
Collaborative Fun – Active vs. passive learning (Morgan Housel)
Sparkline Capital – International intangible value (Kai Wu)
Podcasts
Masters in Business with Barry Ritholtz – At the money: should you be a stock picker? (Spotify, Apple Podcasts)
Movies
Den of Thieves – Gerard Butler, Pablo Schreiber, O’Shea Jackson Jr., 50 Cent (IMDB)
Red Sparrow – Jennifer Lawrence, Joel Edgerton, Jeremy Irons (IMDB)
Music
Nitty Gritty Dirt Band – Fishin’ in the Dark (Spotify, Apple Music)
Justin Timberlake – SoulMate (Spotify, Apple Music)
Nelly – Luven Me (Spotify, Apple Music)
Diplo feat. Thomas Rhett & Young Thug – Dance with Me (Spotify, Apple Music)
Ted Nugent - Stranglehold (Spotify, Apple Music)
Social Media
WallStBets on the environment and Taylor Swift (Instagram)
That’s all for today.
Blake
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.