US macro/job adds
Jobs day came and went, surprising materially to the upside (>350K jobs added in the month, relative to closer to 200K expected).
Average hourly earnings grew at an unsustainable pace, 0.55% month on month, which annualises out to a very large ~6.5% yearly rate.
The number of hours worked fell quite a bit, and AHE, which is a residual calculation, rose accordingly.
Our view; take the numbers with a grain of salt. December and January seasonal adjustments can confound a clear reading. That said, fair to say that the labour market remains in good health, and any near term US recession narrative predicated on the jobs market cracking can be pushed back by a lot.
US bond yields rose strongly, and on the face of it, a modestly lower likelihood of May rate cuts.
However, with inflation tracking to target, and other labour market indicators like quit rates, employment to population, job openings and initial claims data at more normalised levels, we think the bias remains toward cuts in May, and the ongoing normalisation of monetary policy in line with current market expectations.
Either way, good for stocks (the job numbers) and neutral to slightly bad for bonds (given yields are now back above 4% we think they have sufficient valuation support to be appealing from DAA perspective).
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.