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- Macro Monday: Earnings Go With The Labor Market
Macro Monday: Earnings Go With The Labor Market
The Macro Institute's Weekly Economic Primer
The Macro Institute
August 26, 2024
The month of August has seen labor markets once again become a key driver of equities. Truth be told, they were always a key driver but during the pandemic recovery inflation occupied a lot more mindshare for both investors and Fed officials. For all the talk about the Magnificent 7 and AI changing the world, there doesn't appear to be anything unusual taking place when it comes to earnings and employment data. The equity market (and its earnings) struggled when leading indicators of employment like Initial Claims were deteriorating back in 2022 and started to perform better when the data recovered in 2023. Yes, employment matters a lot to the Fed, but it is also THE most important driver of earnings. We could have made this point utilizing initial claims for the third week in a row, but decided to switch it up and show a new relationship that tells a similar story.
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Top Tweets From The Macro Institute
Not surprising, but there is a strong correlation between corporate spreads and PMIs. After all, Baa Spreads and the ISM New Orders Index are both part of the Conference Board's LEI. They are both a function of the economic cycle, so it makes sense that they would look similar.
— Francois Trahan, M²SD (@FrancoisTrahan)
1:11 PM • Aug 22, 2024
There is a lot of debate about what comes next for the economy and financial markets, but one thing market participants agree on is that the first cut to the fed funds rate is nearly upon us.
With that in mind, let's take a look at the four phases of a fed funds rate plateau.
— The Macro Institute (@MacroInstitute)
2:05 PM • Aug 21, 2024
If there is one clear lesson to takeaway from August it is that equity markets are now hyper focused on employment data. Inflation has clearly taken a backseat in the eyes of investors. We have 8 or 9 series we look at to forecast the unemployment rate.
— Francois Trahan, M²SD (@FrancoisTrahan)
1:50 PM • Aug 21, 2024
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