According to the Wall Street's most accurate strategist at Bank of America, Michael Hartnett, if the latest US monthly non-farm payroll report released on Friday falls within the bank's expected range, prices of global risk assets including US stocks may soar significantly. The Bank of America strategy team led by this star Wall Street strategist indicated that if the September non-farm payroll data shows an increase of 0.125 million to 0.175 million jobs in the US last month, this will support the market's optimistic expectation of a 'soft landing' for the US economy and keep US Treasury yields within a certain range, thereby fueling the trading of risk assets.

The latest market survey data shows that economists' median forecast for the September non-farm data indicates that the number of non-farm jobs in the US will increase by about 0.15 million.

It is understood that the Bank of America team led by this strategist had a negative and pessimistic view on the US stock market last year, despite the fact that the US benchmark index, the s&p 500 index, entered a new bull market last year and surged by more than 24%. For 2024, he indicates a preference for bond assets over risk assets like stocks.

In a market research report dated October 3rd, the strategy team led by Hartnett stated that the long positions 'control the situation', and the 'clear description' will show signs of the effectiveness of China's fiscal and financial stimulus plan, as well as clear signals from the Federal Reserve indicating future monetary easing policies.

After rising consecutively for five months to hit new highs, the US stock market showed a declining trend in the first few trading days of October, as investors assessed geopolitical risks in the Middle East, global economic growth, and expectations of a Fed rate cut. According to statistics compiled by institutions, US stock options traders generally expect the s&p 500 index to fluctuate by approximately 1% after the release of the non-farm payroll report on Friday.

Led by Hartnett, the strategy team expressed that a 'gushing' strong non-farm payroll report is defined as - non-farm payroll exceeding 0.225 million, with unemployment below 4.1%. This gushing data is not what risk asset investors like to see, as it is likely to push the 30-year Treasury bond yield above 4.5% and drive the market to avoid risk assets. Meanwhile, when the unemployment rate exceeds 4.3% and falls below 0.075 million job positions, it will be a core catalyst for a significant increase in 'recession expectations', which is also not welcome by risk asset investors.

Therefore, in the view of Hartnett's strategy team, an increase of 0.125 million to 0.175 million jobs in the U.S. non-farm data, which is neither good nor bad, may support the market's optimistic expectation of a 'soft landing' for the U.S. economy.

In the U.S. stock market, the 'bull market rally' spreading across various sectors continues. The benchmark S&P 500 index has recently hit historic highs, mainly due to the unexpected 50 basis points rate cut by the Federal Reserve, resulting in ample liquidity, and the anticipation of a 'soft landing' for the U.S. economy due to significant rate cuts and a resilient labor market.

Overall, global stock market investors prefer a 'neither good nor bad' non-farm data - this data may significantly boost confidence in the 'soft landing' of the U.S. economy and also maintain the expectation of a 50% chance of a 50 basis points rate cut. Although a severely worse-than-expected non-farm data may significantly boost the expectation of a 50 basis points rate cut by the Fed, it will also lead to a major increase in market expectations of a U.S. economic recession, so overly pessimistic non-farm data could lead to at least short-term global stock market weakness.

As of the week ending on October 2nd, the 'Custom Bull/Bear Index' compiled by Bank of America surged from 5.4 to 6.0, the largest single-week increase since last December. A reading above 8 is considered a key reference indicator for Bank of America strategists to 'reverse sell'.

JPMorgan, another major Wall Street bank, stated that a robust employment report - adding over 0.2 million non-farm jobs - will indicate a 'restart of the U.S. economy from this summer's weakness', and may lead some investors to believe that the Fed may refuse further rate cuts at the November meeting (no cut in November, then choose to cut in December). In this scenario, JPMorgan expects the S&P 500 index to remain flat to rise by 0.5%.

If U.S. non-farm payrolls increase from 0.16 million to 0.2 million, JPMorgan predicts the S&P 500 index could rise by 1%-1.5%. JPMorgan strategists consider placing the non-farm numbers in this ideal range as a 'golden girl scenario', as this would indicate higher growth for the U.S. economy without reigniting inflation. In this scenario, the market is most likely to anticipate a 25 basis points rate cut by the Fed at the next November meeting.

In September, the addition of non-farm jobs ranged from 0.11 million to 0.14 million. JPMorgan expects the S&P 500 index to fall by 0.5%-1.5%. JPMorgan strategists note that if non-farm employment data falls within this range, it may reignite concerns about U.S. economic growth and trigger market arguments that the Fed is slow to respond to the economic situation and potential economic recession. In this scenario, JPMorgan expects defensive assets to perform well, and U.S. bond yields to decrease.