Market Update – June 7, 2024

Through Thursday the S&P is up 1.06% this week, hitting an all-time high. Nasdaq stocks were a big contributor to the advance, rising 2.6% this week. Before this morning’s (Friday June 7^th) jobs report, investors were betting on a rate cut, pouring money into stocks, with US equity funds receiving $4.6 billion over the last seven weeks. However, cutting rates is not necessarily a positive. Bank of America strategist Michael Hartnett warns a Federal Reserve rate cut is the “first hint of trouble.” Chances of a hard landing would increase if the market grew more confident of lower borrowing cost, he added.  

After the job report this morning, traders are rethinking the timing of a rate cut. Nonfarm payrolls advanced 272,000 last month, a Bureau of Labor Statistics report showed Friday, handily beating all projections. Average hourly earnings climbed 0.4% from April and 4.1% from a year ago.  

Interestingly, the unemployment rate — which is derived from a separate survey — increased to 4% from 3.9%, rising to that level for the first time in more than two years. The pickup in unemployment mostly reflected people returning to the labor force and not finding work. The number of people who lost or left their jobs both fell. The job market has defied expectations in the past two years, powering the broader economy. However, that strength is expected to moderate as a prolonged period of high interest rates weighs on hiring plans and broader economic activity. 

Our stance is little changed, we remain in the camp of harder landing. Monitoring fundamentals and technicals continues to be our priority.  OmniStar moved into a heavier cash position in 2023 given rising risks and a fixed rate of around 5%. As downside pressure mounts, we remain confident that buying opportunities will be presented and cash will (eventually) be reinvested. This kind of market requires prudence, and patience.  Enjoy a wonderful weekend.  

*Bloomberg