Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.
The significant deviation of the non-farm payroll from expectations is due to the disturbances caused by strikes and hurricanes, and this noise should not change the pace of the Fed's monetary policy.
China Galaxy Securities released research reports stating that labor data other than the increase in non-farm payrolls in October still maintained resilience, with a slow increase in the long-term unemployed population but slightly alleviated supply-side pressures, overall continuing on the path.But after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.The significant deviation of the non-farm payroll from expectations is due to the disturbances caused by strikes and hurricanes, and this noise should not change the pace of the Fed's monetary policy. It is still expected that the 25 basis points rate cuts for the FOMC meetings in November and December are the baseline scenario; the trend in the bond market seems to signal that the Fed still needs to pay attention to the risk of reducing rates too quickly, and the outcome of next week's US election may also affect the pace of future rate cuts by the Fed.
China Galaxy Securities' main points are as follows:
The significant shortfall in non-farm payroll compared to expectations, accompanied by a decline in household employment, with an unemployment rate of 4.14% and hourly wage growth rising to 3.99%.
In terms of establishment survey, there were 0.012 million new positions added in October, significantly lower than the median economist forecast of 0.1 million, primarily due to the impact of two hurricanes and strikes. The September job additions were revised downward from 0.254 million to 0.223 million, and August from 0.159 million to 0.078 million. The non-farm hourly wage growth rate basically met expectations, with a month-on-month increase of 0.37%, a year-on-year growth rate rising to 3.99%, and a month-on-month three-month average acceleration to 0.37%; the year-on-year growth rate of ECI in the third quarter decreased to 3.81%, still in line with a slow downward trend.
In terms of household survey, the unemployment rate continues to remain at 4.14%, in line with expectations; BLS indicates that the household employment survey response rate is normal, not significantly affected. The labor force participation rate slightly decreased to 62.6%. Both part-time and full-time employment numbers decreased, with the cumulative number of part-time employees showing a year-on-year decrease of 3.82% in March, and the cumulative number of full-time employees showing a year-on-year growth rate decrease to -0.62% in March.
The 'noise' from hurricanes and strikes led non-farm employment to fall below expectations, with impacts similar to Hurricane Irma in 2017.
Looking at the factors disturbing employment, it is important to note that the significant decrease in employment in October was caused by hurricanes and strikes, while the campaigning and government-related activities during the period of the elections could provide some support for the addition of non-farm employment, but the downward pressure is clearly greater. Among the factors unfavorable to non-farm employment, the directly impactful strike of 0.0416 million people in October should be highlighted (including 0.033 million people from Boeing, 3400 from hotel groups like Hilton and 5000 from Textron, with a net increase of 0.0388 million people compared to September's strikes), the scale of strikes at Boeing and Textron matching the decrease of 0.046 million manufacturing jobs.
Furthermore, during the non-farm employment survey period in October (the week including the 12th of each month), hurricanes Helene and Milton may have impacted employment, but BLS also stated that it was difficult to assess the specific scale. As a reference, in September 2017 without significant strikes, Hurricane Irma caused a notable decrease in employment from the previous value of 0.156 million people to -0.033 million people in the month (later revised up to 0.092 million people), but did not have a significant impact on the unemployment rate. From another perspective, hurricanes in October may still lead to an increase in government disaster relief employees (a 0.04 million increase in government employees, notably higher compared to other industries), while campaign-related activities are also favorable for new employment; however, the specific impact of both is difficult to measure.
Structurally, the number of non-temporary unemployed individuals is driving the unemployment rate slightly upwards, indicating that the labor market is still slowly weakening.
The number of unemployed individuals in October decreased by 0.009 million to 6.907 million, with a decrease in the labor force population as the denominator, resulting in no significant change in the unemployment rate. In terms of composition, the non-temporary unemployed contributed a marginal growth of 0.13% to the 4.14% unemployment rate, but this increase was offset by a marginal decrease in temporary unemployment and new entrants to the labor market, preventing a rise in the unemployment rate. It is expected that the unemployment rate will marginally increase throughout the year and approach the natural unemployment rate level of 4.4%.
"Soft landing" path remains unchanged, and noise should not interfere with the Fed's decision.
Overall, aside from the significant disruption caused by strikes and hurricanes to the addition of non-farm employment in October, labor data outside of the non-farm employment continues to show resilience, with a slow increase in permanent unemployment but slightly easing supply-side pressures, remaining on the path of a soft landing; the unexpected shortfall in the addition of non-farm employment is due to the disturbance from strikes and hurricanes, and this noise is not expected to change the Fed's pace of monetary policy. It is still expected that a 25 basis point rate cut will be the baseline scenario at the FOMC meetings in November and December; the movements in the bond market seem to signal the Fed's need to be cautious of the risks of cutting rates too swiftly, and the results of next week's U.S. elections may also influence the pace of future rate cuts by the Fed.
The market did not have a significant reaction to the lower-than-expected non-farm data, and the technology sector still led the stock market higher.
The market's response to the noisy non-farm payroll data was not significant. Although the U.S. dollar index and Treasury yields retreated in the short term after the data was released, they ultimately moved higher. The three major U.S. stock indexes also rose; the slightly lower-than-expected ISM manufacturing PMI for the day did not have a prominent impact. CME federal fund interest rate futures show that traders are maintaining the expectation of two 25 basis point rate cuts in November and December, with three rate cuts expected in 2025.
U.S. Treasury yields rose, with the two-year rate up 1.4 basis points to 4.199% and the ten-year rate up 8.7 basis points to 4.376%. The U.S. dollar index rebounded to 104.3228. Technology stocks led by Amazon performed well, with the three major U.S. stock indexes all rising and overlooking the weaker non-farm and manufacturing data. London gold prices fell slightly to $2735.80 per ounce. In the short term, the market also seems to view the significant drop in October non-farm payrolls as noise, with no significant change in expectations for Fed rate cuts or future economic growth.
Risk Warning: Risks of a U.S. economic and labor market downturn, risks of unexpected liquidity issues in the U.S. banking system, and risks of differences and errors in labor market statistics series and methodologies.
Editor / jayden
