Accelerating Markets

The Big News is… The U.S. labor-market recovery is accelerating after a spring lull. Employers added 850,000 jobs in June-the biggest gain in 10 months- and workers’ wages jumped briskly, the government said Friday. Both were strong signs of a developing, yet robust economy, still with a strong demand for workers. Job growth lagged behind, for April and May, with 583,000 and 269,000 respectively, then exploding in June. The big hurdles to hiring are starting to fade. Rising vaccination rates, the easing of government restrictions in businesses and the expiration of employee benefits. Like ‘Superman,’ the S&P 500 appears unstoppable, not even the Federal Reserve, not the Delta Variant, and not even old fashioned fear and greed has been able to slow the ‘steam roller’ surge. “From a market perspective, this was an all out positive jobs report,” says Seema Shah, chief strategist at Principal Global Investors. “While the stronger-than-expected payroll number signals a continued buoyant recovery, the rise in unemployment rate suggests some slack in the market and, therefore, hopefully some respite for the Fed hawks.” She added: “The ‘will they, won’t they’ Fed question still stands, but at least today’s number isn’t triggering major naval gazing.” Technology stocks reared their heads’ and led the gains, pushing the Nasdaq Composite up 116 points, or 0.8% to 14639, setting a new record. As the upswing broadened out, the Dow joined the rally advancing 152 points or 0.4% to 34,786, hitting its first closing high since early May. The S&P, as previously noted, added 32 points or 0.8% to close at 4352, also setting a seventh consecutive record, its longest ‘watermark’ streak since mid-1997! Don Calcagni, chief investment officer at $31 billion money manager Mercer Advisors, said those workers have the highest propensity to spend, which could end up pushing inflation higher, especially if employers feel the need to increase wages further. “That’s a little bit of canary in the mine,” he said.

A Waking Giant Awakens….Europe. A rebounding economy and a plethora of growth and value stocks make the region an ideal destination for investors looking for inexpensive shares in their infancy of potential growth. Global investors have previously had little ‘love’ for the European prospects in the past decade. Anemic growth, negative ‘benchmark’ interest rates, and social and political challenges have kept a lid on european stocks, which traditionally have underperformed versus the aggressive technology-led U.S. markets. Yet now the near-term looks very positive, some calling for ‘out-performance’ by European companies. Like here, a post-pandemic rebound is sweeping most european countries, creating near ideal conditions for its equity markets. “Investors have played the reopening theme in the U.S. with a lot of success,” says Graham Secker, Morgan Stanley’s chief European equity strategist. “Now there’s a general feeling that most of the good news about the U.S. economy is behind us, rather than ahead of us, and that growth momentum is peaking, whereas Europe is earlier in the cycle, and relative economic news flow is going to start to move in Europe’s favor.”

A blistering drought across the breadbasket of states in the U.S. looks set to destroy the crop of spring wheat this year if rain doesn’t arrive in the next few weeks. Without that much- needed moisture, prices for wheat could easily rally by more than 30%., experts say. “We are going to have an extreme shortage of high-quality wheat, ” Shawn Hackett, president of financial firm Hackett Financial Advisors, told Barron’s. “We are not seeing anything good in the key growing area.” Hackett sees the drought lasting through July, sending prices of wheat as high as $10.00 a bushel. Potential rewards are high for those willing to out-guess the weatherman.

Pressure On The Bitcoin Bulls…..Bitcoin’s second quarter-selloff left a pretty big crater in the bull case for the speculative cryptocurrency world. The digital asset fell 41% in the second quarter, the worst selloff since a 43% drop in the fourth quarter of 2018. “We can say with absolute certainty that the hype has left the market,” said Mati Greenspan, who writes the Quantum Economics newsletter. He adds, “that is more of a problem for bitcoin than other assets, since bitcoin is driven largely by momentum and speculation.” (Thanks to Musk and Cuban) The number of active addresses– the alphanumeric code used to move bitcoins to or from a “wallet’ – has dropped from a peak of about 1.4 million on April 15 to only about 500,000 on June 27, according to data from research firm Glassnode. That is the lowest level since early 2019. This all leaves bitcoin at a crossroads, entering the third quarter. An encouraging sign is that attempts to push the price below $30,000 have failed so far. Interestingly bitcoin still has its share of high profile backers, people like Twitter Inc. founder Jack Dorsey and the ‘fun’ guys Musk and Cuban. It also has high profile skeptics, like Warren Buffett. So goes bitcoin, leading a ‘fickle’ market.


China’s President Xi Jinping in a speech on the 100th anniversary of the Chinese Communist Party. Barron’s “The Chinese people will never allow foreign forces to bully, oppress, or enslave us.”

Michael Burry, a key player in both the book and film versions of ‘The Big Short.’ Barron’s, as told to Barron’s Colleague Connor Smith on Barrion’, addressing the shaky Meme market. “I don’t know when meme stocks such as this will crash, but we probably do not have to wait too long, as I believe the retail crowd is fully invested in this theme, and Wall Street has jumped on the coattails,” he told Connor in an email. “We’re running out of new money available to jump on the bandwagon,” he concludes.

Sung Won Sohn, professor of finance and economics at Loyola Marymount University WSJ “One of the biggest issues the economy will face is the churning and turmoil in the labor market,” Mr. Sung said. Mr. Sung added, “Many workers with new leverage in a tighter labor market are demanding not just higher wages but also more worker-friendly conditions, such as the ability to work from home more often, or in cities outside their companies’ home bases”.

Sarah House, senior economist at Wells Fargo. WSJ “In terms of the pace of hiring, this is probably close to max speed just given how quickly workers are coming back,” said Ms. House. “Employers are making it work,” she added