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The Macro Situation

Phillips Curve (noun)

• the controversial model that proposes inflation and unemployment have an inverse relationship;

• the example cited when pointing out that controversy is overrated.

― New Entry in the Updated Devil’s Dictionary

The big news this week? Investors had to wait until Friday for the crunch.

•  272,000 jobs were added in May. That’s 92,000 over what experts predicted and 107,000 over the number added in April.

• Inflation sits at 3.4% (for 12 months ending in April).

• Unemployment rose 0.1% to 4% (Sahm rule still at 0.37 - not over 0.5)

The Fed’s plan to reduce inflation, however, may still be fine. A strong jobs market does not necessarily imply a rise in prices. The Core PCE, which excludes fluctuating food and energy prices, is the Fed’s preferred indicator. It rose by 0.2% in April, lower than the 0.3% increase in March and below the consensus estimate of 0.3%.

Other signs things might be going the Fed’s way:

• The ISM (Institute for Supply Management) report notes demand is down 48.7% from 49.2% the previous month. A reading below 50% is taken to indicate contraction.

• While the number of jobs added was high for May, the number of job openings fell to a three-year low. How can that be the case? One reason might be that the number of added jobs filled existing, as opposed to new, openings. This creates a lag between the two reports.

• The Eurozone cut interest rates for the first time in 5 years.

According to the Fed Watch tool, which tracks the prices of various futures contracts related to interest rates (particularly the federal funds rate), the chance for a rate cut in September or sooner is just over 50%.

Up to the week ending on May 31, 2024, the ANFCI had its history slightly adjusted. It now reads -0.51, which is a -0.01 decrease from the previous week. The unadjusted indicator reads a -.54, marking its fifth straight week of decline.

Core Assets Update

Gold (2311.10) fell precipitously on Friday due to the strong jobs numbers. The worry is that the interest rate cut will be delayed, hence the US dollar will remain stronger for longer.

Crude Oil (75.38) dropped after OPEC+ unexpectedly announced unwinding some of the previously planned cuts on production.

The 10-year Treasury yield (4.434%) jumped following the strong labor market indications. This response is also a natural adjustment to interest rates staying higher for longer as a cut in rates will bring that yield down (and would be good for bond ETF holders).

                                             -Todd Mei, PhD and Sebastian Purcell, PhD

AI Sentiment Report

The following sentiment scores use AI to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week. 

-The Research Team:

                     Dom Viera, Samantha Russell, Nicole Zinuhova, Michelle Milan

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DISCLAIMERS

This newsletter is provided for educational and entertainment purposes only. Robin Technologies and Analytics LLC is the firm that distributes The Art of The Bubble products. The firm does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Robin Technologies and Analytics LLC registered as an investment adviser or broker-dealer in any jurisdiction.

You should expect no financial returns one way or another based on the statements contained herein. These points hold equally for any statements that could be attributed to The Art of The Bubble, 1.2 Labs, or any related business entities or personnel operating in association with Robin Technologies and Analytics LLC. If you decide to buy or invest in anything, then your returns and potential losses are your own. No statements about taxation are taxable advice and you are encouraged to consult your own tax professional. No statements about laws are legal advice and you are encouraged to consult your own professional legal counsel. You are finally also encouraged to do your own due diligence before investing in anything consulting with appropriate professionals as needed.

Benchmarks and Data Sources

All data not otherwise specified (or obvious from context) is taken from TradingView.com.

The cryptocurrency benchmark used is an equally weighted mix of BTC and ETH. While the benchmark for stocks used is the Nasdaq 100.

Conflicts of Interest

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