The recent Non-Farm Payroll (NFP) report has delivered a significant surprise, solidifying the bullish outlook on the U.S. economy. According to Andreas Steno from Steno Research, the job market is defying recession chatter and indicating robust economic activity. This unexpected strength is poised to impact Federal Reserve policy and market strategies moving forward.
“The latest job report just dropped, and it’s music to our ears—solidifying our thesis once again,” says Andreas Steno. Key highlights from the report include a notable increase in construction hiring and solid performance in service jobs. Steno notes, “Construction Hiring: Markedly up again. This is a strong cycle signal, indicating robust economic activity. Service Jobs: Solid as well, reinforcing our suspicion that the ISM Services PMI is lagging behind the actual trends.”
Adding to the positive employment numbers is a hawkish surprise in wage growth, which aligns with the NFIB survey’s signals of re-acceleration in wages until around August before cooling off towards year-end. This has significant implications for the Federal Open Market Committee (FOMC) meeting. Steno asserts, “It’s going to be tough for the Fed not to ramp up their hawkish base-case in the June projections. We stick to our base-case of no rate cuts this side of the election, and we wouldn’t even rule out another hike into 2025.”
On the market front, Steno offers several strategic recommendations. Despite facing some headwinds in short USD positions, he remains confident in other strategies. “Short Utilities: Still a strong case. We’re sticking to it. Long Energy vs. Metals: This strategy is paying off big time. We’re seeing significant cluster risks in metals like Gold, Silver, and Copper due to the lack of momentum for a Fed cut, despite cuts elsewhere,” he explains.
A significant trend identified by Steno is the increasing role of small businesses and increased immigration in filling job openings. He states, “There’s a major alteration underway: small businesses, or even tiny businesses, are becoming much more important employers.” This shift is widening the gap between the NFP and the household survey month after month.
Looking ahead, Steno remains optimistic about liquidity-sensitive bets in Tech and Crypto, anticipating a bottom in liquidity within the next 10 days. He concludes, “We will likely add some directional risk asset positioning next week as we get closer to a green light from our liquidity signal.”
For a detailed analysis and strategic insights, visit Steno Research.
