Jobs Jobs Jobs

So the jobs report came out late this week, and kinda defied all expectations. Ren-Mac outlined:

A significant beat in payrolls with an even more surprising downtick in the unemployment rate. Recession talk is premature along with talk of a policy pivot. This report is consistent with an inflationary boom. 75 in September and on the table in Nov and Dec.

— RenMac: Renaissance Macro Research (@RenMacLLC) August 5, 2022

Fed Funds Futures are sitting at the following (with benchmark at 2.5%):

Sep: 97.44 (2.56%, Fed meeting is end of Sept)

Dec: 96.52 (3.48%)

Mar: 96.37 (3.63%)

Point is while there was a lot of talk on Friday about how this jobs report forces the Fed to keep the aggressive rate hikes alive, it doesn’t seem like the market is aligning to that (looks like 100bps by December). Market expectations / futures are often wrong and we may see this change quickly.

While I am now biasing towards potentially more aggressive rate hikes (contrary to futures implications) and thus a bit more more mayhem in financial markets, no change to how I’m thinking about our investments. Keeping calm and carrying on.