Google's code, plus market trends, messy jobs report, rising yields, and 🧁 weekend sprinkles 🧁
The Sandbox Daily (11.1.2024)
Welcome, Sandbox friends.
Today’s Daily discusses:
the robots are coming
follow general market trends
messy jobs report
rising yields pressuring equity markets
🧁 weekend sprinkles 🧁
Let’s dig in.
Markets in review
EQUITIES: Nasdaq 100 +0.72% | Dow +0.69% | Russell 2000 +0.61% | S&P 500 +0.41%
FIXED INCOME: Barclays Agg Bond -0.40% | High Yield +0.01% | 2yr UST 4.212% | 10yr UST 4.386%
COMMODITIES: Brent Crude +0.23% to $72.98/barrel. Gold -0.12% to $2,745.9/oz.
BITCOIN: -1.35% to $69,185
US DOLLAR INDEX: +0.33% to 104.317
CBOE EQUITY PUT/CALL RATIO: 0.63
VIX: -5.53% to 21.88
Quote of the day
“Everything you've ever wanted is on the other side of fear.”
- George Addair
The robots are coming
As Google continues to push the boundaries of artificial intelligence (AI), it's not just integrating the technology into its products and services – it's also using AI to build them.
25% of all new code at Google is now written by AI.
The new world order is changing.
Source: Ars Technica
Follow general market trends
72% of index constituents within the S&P 500 are trading above their 200-day moving average.
This measure of market breadth has maintained a channel oscillating between 60 and 85% all year; it’s important to hold ~60%, or else price at the index level has a hard time pushing higher.
Remember, the stock market is a market of stocks. If the broad measure of stocks in the world’s most important index are trending up, not down, then it’s worthwhile for investors to lean into the general trend of the market and maintain a risk-on posture.
Source: J.P. Morgan Markets
Messy jobs report
Distortions from back-to-back hurricanes and a strike at Boeing made October’s employment report much more difficult to interpret.
U.S. nonfarm payrolls increased by just 12,000, well below the consensus estimates of 100,000 and the smallest gain since the decline in December 2020.
Private payrolls actually fell by 28,000.
Although the hurricane impact will fade, more important for the Fed is that the prior two months of payrolls were revised down by 112,000, the most since January.
Meanwhile, the unemployment rate remained at 4.1%.
Despite some messy dynamics under-the-hood, the U.S. economy has experienced a net addition of jobs for 46 consecutive months.
The labor market’s resilience is one major source of mettle underpinning the broad economic strength over the last two years.
In the establishment survey, the weak payroll numbers were based on a collection rate that was a bit of a joke. At 47.4%, the initial survey response rate was the lowest for an October since the Bureau of Labor Statistics (BLS) discovered computers back in the mid-1980s! BLS reported a collection period of just 10 days, at the low end of their historical range. So, investors should look for a potentially large revision next month. But, the August and September collection rates were both in the mid-90s showing the importance of looking at the trend in payrolls, not the initial print.
In addition to weather, labor strikes took a bite out of payrolls. Machinists at Boeing have been on strike since September, hitting manufacturing payrolls which were already in a downtrend because of the cyclical slowdown in the industry. Manufacturing payrolls plunged 46,000, down in four of the past five months and the most since the pandemic shutdown.
Bottom line, the significant downward revisions to previous month’s payrolls reports will keep the Fed on an easing path next week with another 25 basis point cut.
Source: Bloomberg, ZeroHedge, Charlie Bilello
Rising yields are pressuring equity markets
The level of bond yields are much less a concern than the speed of bond yield increases. Equities tend to struggle to digest large and fast increase in bond yields.
If U.S. 10-year yields increased by more than 2 standard deviations over 3 months, bond sell-offs weigh on the S&P 500 and 3-month rolling equity/bond yield correlations turned negative.
Such sharp increases in yields happened during the May 2013 taper tantrum, the German Bund tantrum in April 2015, and twice during the Fed tightening in 2018.
Often they were due to hawkish monetary policy pivots, in part due to concerns about rising inflation. This time the market is repricing the dovish Fed pivot from the summer
Source: Goldman Sachs Global Investment Research
🧁 Weekend sprinkles 🧁
Here are the ideas, sights, and sounds that caught my attention this week – perfect for quiet time over the weekend.
Blogs
The Big Picture – Where Might Consensus Be Wrong? (Barry Ritholtz)
Humble Dollar – Never Quite Enough (Jonathan Clements)
Carson Group – Seven Reasons This Bull Market is Alive and Well (Ryan Detrick)
Connecting Spirit, Mind, Body, and Money – Why You Had to Go Down the Wrong Road (Justin Castelli)
Can I Retire Yet – Should the Election Impact your Investment Portfolio? (Chris Mamula)
New York Times – How Intel Got Left Behind in the A.I. Chip Boom (Steve Lohr and Don Clark)
Podcasts
On the Tape with Dan Nathan and special guest Dan Ives – The Many Lives of AI (Spotify, Apple Podcasts)
Behind the Markets with Jeremy Siegel, Jeremy Schwartz, and special guest Phil Huber – Going Beyond Stocks and Bonds: How Much is Too Much and Cliffwater’s Solutions (Spotify, Apple Podcasts)
Movies/TV Shows
Across the River and Into the Trees – Live Schreiber, Josh Hutcherson, Danny Huston (IMDB, YouTube)
Music
SYML – Where’s My Love (Spotify, Apple Music, YouTube)
The Black Keys feat. Beck – I’m with the Band (Spotify, Apple Music, YouTube)
Books
Ryan Holiday – The Daily Dad: 366 Meditations on Parenting, Love, and Raising Great Kids (Amazon)
Pop Culture
Bryson DeChambeau – Send this to a friend who needs to work on their three putting (Instagram)
Matt Kelly – Nolan Ryan once threw 235 pitches in a game (MLB.com)
That’s all for today.
Blake
Questions about your financial goals or future?
Connect with a Sandbox financial advisor – our team is here to support you every step of the way!
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.
Please see additional disclosures at the Sandbox Financial Partners website: