If there is not a government shutdown, Friday is the release of the all-inclusive BLS Employment report. However, can a case be made that this influential survey is outdated? A major component of the survey is non-farm payrolls—a vestige of 90 years ago when over 25% of society was involved in agriculture. Today it is less than 2% of society and it is producing more product than ever before.
[Note: Government shutdowns typically are market and economic nonevents but have made for some sensationalist headlines]
Several times Bloomberg data has been refenced stating that GOOG, AMZN, MSFT and META have announced $7 trillion in capital spending for 2026-2030, a staggering amount that is a massive economic stimulus that sovereign governments cannot remotely match.
It has also been asked whether all the things that companies want to purchase are available and perhaps more importantly will this spending increase revenues that will generate profits. Will revenues increase by trillions to generate a reasonable return on investment?
There are several companies that are priced as though such will occur.
The irony of this technology spending is that the people that might be negatively impacted the most by this spending have fully adopted technology—recent college graduates and those aged 18-30.
The good news about this potential spending is that most people will not only muddle through, but their lives will improve and so will the lives of their children as have been the case with every technological advance.
Jobs will be created if the market is permitted, absent from the inevitable calls of government intervention. This is what free market entrepreneurialism is all about and delivers. This higher productivity leads to a higher standard of living and jobs.
An argument can be made that technology driven productivity enhancement is now separating employment growth from economic growth.
This statement is perhaps significant given the Federal Reserves’ myopic focus upon job creation. Can an argument be made that jobs creation could be viewed in a similar light as the term non-farm payrolls?
The economy requires higher productivity to stimulate economic growth given the declining birth and immigration rate.
As noted there will be calls for “government to do something,” especially if the 18–30-year cohort begin to demonstrate that AI is taking away employment opportunities. There are ample stories as to how recent college grads cannot find work in their chosen fields given the increased implementation of AI in entry-level white-collar jobs.
This is all occurring in an era of geopolitical crisis, potential sovereign debt problems, social crisis stemming from generational leadership changes (think Mamdani). Clashes primarily caused by the overproduction of elites vying for power with young people not trained for today’s or tomorrow’s future.
Reiterating one reaps what they sow as it is the 18–30-year-old cohort that adamantly believe in and have fully adopted technology that may eliminate many entry level jobs.
The future is always unknown. Is tomorrow more unknown than yesterday’s future or does it appear it is more uncertain given that it is the here and now?
Regardless of the diatribe, the markets will continue to trade on the data until that data point is no longer of significance, and another replaces it. Markets will always trade to the extreme, extrapolating the current environment into perpetuity.
An issue today is that no one knows the leverage being employed and the impact of double and tripled levered single stock ETFs. [Note: ETFs are largely comprised of derivatives and futures not the shares of the company]
What happens if the futures/derivatives cannot be rolled over as was the case several years ago in the popular oil ETF which caused oil prices to go negative?
According to the WSJ the three largest “2x” levered single stock funds are for TSLA, NVDA and Strategy (Bitcoin).
By definition buying and selling is amplified 2x both on the upside and downside. Fear is exponentially more powerful than greed.
Today the JOLTs Job Openings are released. What will it suggest?
Commenting on yesterday’s market activity, equities nominally decline, and Treasury prices moderately rose over concerns of a looming government shut down. Gold hit another record.
Last night the foreign markets were mixed. London was up 0.09%, Paris down 0.37% and Frankfurt up 0.03%. China was up 0.52%, down 0.25% Japan and Hang Seng up 0.87%.
Futures are lower by 0.25% as a government shutdown is looming. The 10-year is off 1/32 to yield 4.14%.
