Major averages rose Friday on higher though below average volume on news of a strong June jobs report. The S&P 500 came within three points of its all-time high. Meanwhile, Treasury 20+ year bonds hit new price highs, thus new yield lows, as represented by ETF TLT. With more than $12 trillion in debt at negative interest rates, growing uncertainties, and a loss of confidence, foreign institutions are buying up US debt which, though at record lows, still provides a positive yield.
With the Fed having no choice but to remain on hold on any rate hikes, and with global central banks continuing to print en masse, the capital is finding a home in US debt, US stocks, and hard assets such as real estate and commodities. This is a potentially nightmarish version of the Goldilocks environment where the Fed is prevented from raising rates, pushing stocks higher, while financial structures teeter under the weight of expanding bubbles.
It was reported by MarketWatch: "The sharp rebound in hiring last month fits with other evidence such as extremely low layoffs and record job openings that suggest the labor market remains the healthiest it’s been in years. The June jobs report also offers confirmation the U.S. economy is expanding at a moderate pace and keeping a recovery that just turned seven years old intact."
Yet while the June jobs report came in strong, the May jobs revision disappointed with private payrolls going negative for the first time since 2010.
And while more people returned to the workforce as indicated by the labor force participation rate, the June uptick comes after a 0.2 percentage point decline in May when it was noted many have given up looking for work.
Indeed, it was disturbingly noted in a recent article that the number of people with criminal records has skyrocketed over the last decade which prevents them from finding meaningful work, thus this group makes up a good portion of those who have given up. Indeed, those who no longer look for work are not counted in the unemployment rate according to the Bureau of Labor Statistics. This creates a "rosy" but misleading picture giving the Fed a chance to jawbone about higher rates in the future even though they also know any meaningful increase in rate hikes would make the interest rate burden unbearable on the staggering amount of debt.
We remain close to our ever-changing watch lists and screens as always so are quick to spot potential set-ups in either direction as we remain fluid.