Jobs Report Disappoints, Manufacturing Slowdown Continues

While Friday’s jobs report was largely disappointing—the retail, trade, and transportation sectors all saw a more significant net decline of ~11,000 workers in August, and private sector employment expanded at the slowest pace since February—focus is primarily centered on central banks this week. The ECB is expected to cut rates again when they meet on Thursday (moving further into negative territory), and many wonder if the Federal Reserve will follow suit when they meet next week. What can we expect from a cut though when we’re already seeing negative real rates on the 1-year through 19-year U.S. Treasuries, and the 30-year UST yield is nearly 20 bps lower than at any other point since the last recession? Given that uncertainty, many investors have turned to gold as an alternative to bonds as it remains near a three-year high. While it seems poised to continue its ascent, we could also be witnessing a “speed of greed” scenario.

1. While U.S. payroll data is still fine, the 3 and 6 month trends are not. If job creation turns negative, historically a recession is likely to follow within 18 months…

Source: WSJ Daily Shot, as of 9/9/19

2. A nice summary of the state of U.S. manufacturing. Readings below 50 denote contraction.

Source: Institute for Supply Management, as of 9/6/19

3. While the “official” reversal of QE ended last month, so far the Fed has continued to shrink its balance sheet.

Source: The Chart Store, as of 9/6/19

4. How much of the S&P 500’s revenue if from overseas?

Source: FactSet, as of 9/9/19

5. U.S. corporations are taking advantage of the low-rate environment by issuing new or refinancing their existing debt.

Source: FTN Financial, as of 9/9/19

6. With 1-year through 19-year treasuries in negative real yield territory, how much room does the Fed have to cut?

 Source: The Chart Store, as of 9/6/19

7. While the yield on the 10-year UST got within 10 bps of its 10-year low, the 30-year is 17 bps lower than any time during this recovery/expansion.

Source: The Chart Store, as of 9/6/19

8. Has Gold become over-extended? Did it rise too far, too fast?

Source: The Chart Store, as of 9/6/19

9. A welcome reversal for many EM countries:

Source: WSJ Daily Shot, as of 9/9/19

10. And look how population flows are projected to change over the next 80 years!

 Source: Pew Research Center, as of 7/30/19