I agree investors need to look beneath headline numbers. NFP can look strong while revisions, participation, hiring breadth and duration of unemployment tell a more nuanced story. August payrolls rebounded strongly, but longer-term unemployment remains a concern.
Right now I am watching long yields most closely. The 10Y has already tested 5%, while fiscal deficits, Treasury supply and inflation expectations can keep long-term borrowing costs elevated independently of the Fed's next move.
That matters directly for equity valuations, mortgages and corporate financing. The Fed just hiked to 3.75%-4.00% and its projections remain hawkish, but the bond market may tell us more about financial conditions than simply guessing the next FOMC decision.
So yes, NFP, VIX and Fed decisions matter, but I would rather watch what is happening underneath them.
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- FrankRebecca·09-17 13:53Mortgage transmission is the part people still underweight. Even if hikes pause, heavy Treasury supply can keep term premium and 30Y mortgage rates sticky, which hits housing and capex before the next Fed guess does.LikeReport