Powell Doesn't See It, but U.S. Employment Is Actually Shrinking

Employment contracted in 2024Q2, contrary to what NFP showed

Highlights

• Employment contracted in 2024Q2, contrary to what NFP showed

• Blowout trade deficit for December means downside risks to Q4 GDP

• There is a long runway for the Fed to cut rates, and markets are not pricing that in

• Negative yield spread between Canada and the U.S. sets the stage for a weaker loonie

Key Takeaways

Nasdaq Rallies, But Caution on Valuations & AI

• U.S. equity futures are well into the green, led by the Nasdaq in reaction to some earnings “beats” yesterday, notably by Meta. No Fed rate relief, extended stock market valuations, and now doubts over the investment returns that AI will deliver are all reasons to be very cautious.