In today's episode, Tyler covers an eventful Friday for our markets and explores the implications of the surprisingly strong jobs report, which smashed expectations but revealed some underlying weaknesses upon closer examination. We'll also analyze the bond market's reaction to the report and what the VRA see's looking forward. Tune into today's podcast to learn more.

Don’t look back because the market is closed. Good Friday afternoon, everyone. Tyler Herriage here with you for today’s VRA Investing podcast. Hope you all had a great end to your week out there. Hope you enjoyed, at least from a stock market point of view, the day off yesterday in honor of President Jimmy Carter passing. So kind of a weird week this week with a midweek break. It’s been the last three weeks now, New Year’s the week before and Christmas the week before that. So next week will be the first full week of market trading in what feels like quite some time for sure.

But the market didn’t look too rested from the day off yesterday as we open lower across the board today. We managed to finish a little bit off of the lows of the day today, at least for some of our major indexes and sectors. But overall, not a pretty day to close out the week. This week as this morning, futures were a little bit more flat to lower until we got the jobs data at 8:30 Eastern Time this morning. Coming in stronger than expected. You’ll see why I use quotations there here in a second. But coming in with 256,000 jobs created for the month of December, crushing estimates of 155,000 jobs created. Now we’ll get into the real data here in just a second.

[00:01:34]:
But we’ve talked about this so much over the last year, really ever since the first BLS report came out that from 2023 the year end numbers ultimately were revised lower by roughly 800, 000 jobs with estimates as high as 1. 1.2 million jobs. Revised lower. Right. So those are jobs that didn’t exist. You know, there’s so much manipulation done with this data, it’s tough to tell exactly where the errors are coming from. That’s how bad it is. But so we know from over the last 24 months that jobs have been revised lower by anywhere from one and a half to estimates as high as 2 million jobs.

So that’s what we’ve seen from the Biden admin time and time again. So it seems convenient here to get a good jobs number for Biden’s final month in office here. And we’ll see what happens if we get more real data under Trump. We’ll cover a little bit of that here today as well. And what Kip talked about on the podcast this week, that the Fed under Trump specifically was very restrictive. You saw a time period from the Fed under Obama, his predecessor, from 2016, where, you know, we’re looking at zero interest rate kind of policies from the Fed, if Not 0 interest, 0% interest rates, close to it during that time we saw quantitative easing in bulk during that time. And then as soon as Trump got into office you saw the switch where we got instead of quantitative easing, we got quantitative tightening during that time period. Interest rate hikes that led to the December 2018 Christmas Eve massacre that we’ve talked so much about here as well.

[00:03:23]:
And then get back to a Democrat president again, what does the Fed do back to you know, cutting rates more? We’ve done, we’ve seen a little bit of quantity of tightening over the last year and a half from the Fed more out of necessity than anything to fight off inflation. Right. So we’ll see now what is so interesting about so much to cover here today. First, let’s stick with the jobs data and then I’ll get to the Fed and the bond market here on the day which certainly was one of the main stories of the day today. But in this report today, again, 256,000 jobs created versus the expectation of 155,000. But now if you even did just the slightest bit of diving into this report, you would see how this hot jobs number type of headline. Absolutely. The narrative falls apart here in this report.

It shows that full time employment dropped by as much as 350,000 jobs. So all of this was part time work. Right. Which we don’t have quite the data on. We’ve talked about how part time work has been manipulated as well. Because if somebody loses a job and then has to find two part time jobs to make the same take home pay, they count that as a net one job to two jobs being created. It’s absolutely insane the way that that is done. But then you look at the sector.

[00:04:54]:
So it’s all the largest growth. Number one, healthcare. Okay, that’s fine. The second and third, leisure and hospitality and retail which are the lowest two paying rent wa, the lowest wage sectors, the two lowest wage sectors for job growth. So again, not ideal jobs, part time jobs in the third or the fourth year, government jobs. So no real job creation if you actually dive into the numbers. These aren’t industries that people are you know, dying to get into here to earn a better wage. They’re not switching between jobs to, to get a higher wage like we’ve seen in the past.

So no, I would not have called this a hot jobs report in any sense of the. But it looks good for the headlines.

And again, Biden’s final jobs report here. It’s tough to say that anything will be looked positively on this really, except, you know, maybe it’ll look good in the history books, I guess. But so on that news today, bond yields spiked, hitting their highest level since November of 2023. But I have to point out here, yields peaked at the Open today and then kind of just meandered after that, still finishing up 1.77% on the day to a 4.77 on the 10 year yield. As you know, those numbers do not concern US yields at these levels. Yes, restrictive, overly restrictive.

[00:06:20]:
But not prohibitive, especially with the growth that we see coming from the innovation revolution, the roaring 2000s and now the Trump economic miracle 2.0 that we see coming here. So we’ve compared this period, just a quick recap that we do here often, to the 1995-2000 period where yields averaged above a 6% during that same time frame while the NASDAQ rallied 575%. So yes, again, restrictive, but not prohibitive here. And I will point out yields are at extreme overbought on steroids levels here. This is the resistance point that we saw in that 2023, 2023 time frame that yields pulled back from there. So as we see it, this remains a counter trend move in yields. And our call for lower yields remains unchanged here. And similarly with the US Dollar as well, that continues to rally here.

But as we saw in Trump’s first term, the US Dollar peaked just before the inauguration. We think we might be in for a similar setup here as well. So on top of the jobs numbers, there was one other factor that freaked out the bond market and that was consumer inflation expectations. Now, I don’t put a whole lot of stock into these surveys, Right. Very rarely are they on point. If anything is more of a contrarian indicator because the majority is oftentimes wrong. So if consensus is for higher expectation, those numbers just jumped from the consumer Expectations jump from 2.8% to 3.3%. The five year expectations jumped as well.

[00:08:02]:
You know, again, as a contrarian, don’t mind seeing that a whole lot actually. But it certainly didn’t help alleviate the bond market’s fears today. But as unconcerned as we are about the bond market at these levels, there’s no doubt that the bond market is kind of driving the market right now. There’s a lot of reactionary trades happening due to the rise in yields that we’ve seen. But what’s amazing about this to me, and it’s tough not to laugh at honestly, is this sentiment flip flop that we’ve seen from the Fed and Fed watchers for that matter, where just a month ago Fed watchers were looking at four rate cuts in 2025. Then we had the Fed meeting and they bumped that number down to two rate cuts for 2025. Fast forward to today. I mean, this was just a week ago.

And now fast forward to today, a jobs number comes out. Again, not a hot jobs number really, once you dive into it and they’ve completely flipped. Now we’re talking about rate hikes in 2025. Yeah, it’s only a few people talking about it, but the fact it’s even being whispered about is, I mean, honestly, a little bit humorous. If we have such a hot economy, then sure, bring on the rig hikes, you know, hopefully not for inflationary reasons, which we don’t expect here at all. We continue to get deflationary readings out of China in their PPI and cpi. We think that China is going to continue to export deflation to the rest of the world here. We think inflation is a story that’s now in the rear view mirror once we can get back to some common sense policies here in 2025.

[00:09:40]:
But absolutely, again, the flip flopping here is insane. Going from four rate cuts expected in 2025 just a month ago to now rate hikes. I mean, again, a week ago economists were talking about a recession, right, Due to Trump’s tariffs. I just saw a piece today. The financial deregulation that Trump’s going to do is going to lead to an economic collapse worse than 2008. What are these people smoking?

It’s absolutely insane for all of the reasons we’ve covered here. So much about the strength of a consumer and especially the strength of the housing market, where you have 40% of homeowners right now own their home outright, the highest in history. You’ve got consumer credit scores at all time highs on the company level debt. Their debt levels are at the lowest levels in decades as well.

The, the ability for companies to lever up right now is actually pretty good. So again, the fact that we went from recession calls to rate hike calls in the last week is. Anyway, on to the next topic here. One other factor that people had in mind today was wage growth, which was the highest level for wage growth coming in at 3.9%, I believe, since March of this year. But wage growth here is not something that I would necessarily root against. We want people at the end of the day to make more money. Now, is it a contributing factor to inflation? Sure is 3.9% enough to add inflationary pressures? I don’t think so. I think that wage growth here at these levels, wage growth is still in my opinion behind where inflation was.

[00:11:25]:
So wage growth here is not a what’s causing inflation. I would say it’s a symptom of the real inflationary pressures that we’ve seen that wage growth is still catching up to the inflation that we had to suffer through since 2020. So again, point being wage growth is still slowing. So there’s still a downtrend here from the peak which tends to be a good sign for future disinflation as well. So again, not necessarily something we’re advocating and rooting for here. We wanted to see employees continue to receive wage growth. Right. Economic prosperity across this country.

But the numbers here do show a story of disinflationary trends. So to wrap up here and to kind of remove some of the noise, but between all of the flip flopping that we’ve seen in the financial mainstream media, we’ll cut straight to the chase here for you. In 2025 we we continue to look for bond yields to move lower. We do expect GDP to be on the rise as well. We expect the US Dollar to move lower and we expect stocks to rally led by tech and the semis. That’s how we’re positioned here. We’ll keep you updated on and if anything changes from that point of view. But right on cue, exactly what you want to see.

[00:12:45]:
When you have the S&P 500 now, less still less still than 5% away from its all time high, I believe it’s less than 4 1/2% away from all time highs and we’ve seen sentiment indicators absolutely deteriorating here. That’s exactly what you want to see. If we were to see a 5% pullback like this or 78% like we see from other the other sectors and major indexes and our sentiment indicators were still full on bullish, that would be a concern for us here. And we’re just nowhere near those levels right now. Take a look today at a few of our sentiment indicators. We’ve got the fear and greed index almost back to extreme fear levels at a 27 right now, 25 is extreme fear. Then we had the AI which came in yesterday, so on the holiday. But what was so interesting here is that for the first time, and let’s see here, I want to take a look at this for the first time at least since last summer, we have more bears than bulls in the AI sentiment survey right now 37% of investors bearish to 34% bullish here again not the sign of a market top put call ratio today.

[00:14:02]:
Spent a good portion of the day opened and closed above a 1 which as we talk about here often, anything above a.0.7.7 is kind of the average. Anything above that is leaning bearish. Anything above a one that’s seen as excessive bearishness. So again, if sentiment were ultra bullish right now, we’d be more concerned. That’s just simply not where we’re at. We’ll continue to look at this as an opportunity to buy the dip. You know, we’re looking for a little bit of a run up, this run up from the post election to continue into inauguration day and then have a bit of a buy the rumor, sell the news event. We might be setting up for the opposite here where we’ve seen this pullback now into the inauguration and then animal spirits back into this market.

We’ve talked about so many topics that are bullish for this economy, for our country and for stocks under a Trump presidency. And once those can start to get enacted, we think the market’s going to be very excited about it. You know, even if those policies don’t go into effect right away, the stock market is a forward looking mechanism looking 6 to 12 months forward. So it will start to anticipate those policies being implemented and we’ll get front running in the market. That’s what we expect here. So looking at our market action on the day today, we did finish lower across the board here. Certainly not a good day today. S&P 500 down one and a half percent to 5,827.

[00:15:30]:
But as I pointed out earlier again, excuse me, less than four and a half percent from its all time high still. Nasdaq down 1.6%. Dow similarly also down 1.6%. Those also still not in in correction territory even yet then small caps which are now in correction territory. But I do want to point out you see a correction in the market, they’re not uncommon. A 10 plus correction happens every 18 months. So it’s not something to be freaked out about but looked at as an opportunity in our opinion. So if we haven’t had one, we didn’t see one in 2023.

If we get one every 18 months, you know they’re going to happen. You know, yes, it’s painful while they’re happening.

But not panic selling we think pays off in the long run and especially the kind of year we expect to see from this market. Even if you don’t get in at the exact bottom, you’re going to be pretty happy with the price you paid at the end of the year. Next up, looking at our internals on the day today. Not going to sugarcoat it here. Not great numbers from the internals. We had more declining stocks than advancing stocks on both the NYSE and the NASDAQ. Roughly 4 to 1 negative on the NYSE, 3 to 1 negative on the NASDAQ, 52e highs lows also negative across the board here and volume over. Let’s see, right at 3 to 1 negative on the NYSE.

[00:17:00]:
This was interesting though. NASDAQ volume was positive for a good portion of the day today and just barely came in negative here. We’ve seen good volume on the NASDAQ on the buy side, specifically on the nasdaq. Next up here looking at our sectors on the day. We had one sector finishing higher on the day. Energy as I’ll get to here in a minute. Oil having a big day today. I believe Natural gas had a big day today as well.

Let’s get a quick look here. I should do this in the commodity watch. Well, my screens haven’t updated so I will get to that in the commodity watch. Our laggards here on the day for our sectors, we’re real estate leading the way lower followed by financials and tech. Just to recap here, I still can’t believe that that article that I saw that the Trump’s deregulations were going to lead to a bigger economic crisis than 2008. We’ll see about that one. Hey, but those are the kind of calls that again as contrarians keep us so bullish. We want a certain level of fear and negativity in the market.

[00:18:09]:
And again, when we get to the excessive optimism, right, or as I guess Ben Bernanke would probably say, irrational exuberance in the market, then we’ll start to get worried. We’re just nowhere near those levels right now. So finally here for today, taking a look at our VRA commodity watch. Let me get a quick refresh here. A lot of green on the screen here, by the way. Gold up nicely today. 1% now back above $2,700 an ounce. $2,717.

We did have the gold miners higher on the day as well. Not quite the outperform we didn’t have outperformance today. You would have liked to have seen some good outperformance from that group. But we have seen gdx, the gold mining ETF outperforming the metal, which is exactly what you want to see. Next up here, silver up 9/10 of 1% to $31.30 an ounce. Copper now slightly lower on the day, down half a percent to $4.29 a pound. And oil, as I mentioned earlier, having a big day today, up over three and a half percent now to $76.57 a barrel. And as I mentioned, natural gas has been on a big move lately, up another seven and a half percent today to $3.98.

[00:19:32]:
I believe that is TCF or MCF. Well, for, for my commodity experts out there, you can correct me on that one. My apologies. Finally here for today, bitcoin getting a little bit back today, up two and a half percent now, still well below a hundred thousand. Was above almost 296,000 today, now at 94,800. A Bitcoin here again, another group that we do remain extremely bullish on here. So again, folks, thank you for tuning in with us here for our VRA Investing podcast. That’s all that we have time for here today.

Please be sure to subscribe to receive our podcasts every day at the market close. You can sign up at VRAletter.com, click the podcast link at the top and we’d love to have you with us. Thanks again for tuning in. Until next time. We’ll see you back here on Monday for for the close. Have a great weekend, everyone.