October began by mimicking September’s downward price bias, until a Friday rally reversed prices upward.
The same concerns of “interest rates higher for longer” producing a prolonged recession has had investors looking elsewhere for gains, notably fixed income products rather than stocks.
However, the positive (?) Friday employment report gave some investors a reason to pick up some beaten-down stocks in the belief they have been oversold. So the week ended on an up note and may set up another FOMO situation next week as investors on the sidelines fear missing out on a potential 4Q rally.
Of note, however, is that a deeper reading of the employment report which triggered the rally shows U.S. employment not nearly as rosy as the Friday figures would suggest. The “surprisingly large” gains were all part-time jobs, while full-time jobs actually fell. Many of the job gains were in the government sector, meaning non-producer-type jobs, for which the federal budget is enlarging; these jobs will have to be supported by tax dollars – not a recipe for economic growth. Also, those looking for work dropped significantly, so the “unemployment rate” calculation is greatly skewed, making it look far lower than actual conditions.
Whether investors understand the true, shrinking employment situation, and how much the breaking terrorism in the Middle East will carry over to the markets next week remains to be seen. In the meantime, the market closed the week on an updraft.
Most of our gains continue to be found in our short positions. Some of our longs recovered on Friday.
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