A recent jobs report exceeded expectations, adding 228,000 new jobs in March. However, instead of boosting investor confidence, it’s been viewed as bad news due to President Trump’s economic policies.
The job growth is attributed to a fragile labor market environment that was already steady but uneasy. The market’s reaction suggests the economy is not as weak as perceived, and good job reports are actually bad news for investors who rely on the stock market to gauge economic health.
In 2022, a similar repricing event occurred when the stock market sold off hard due to high inflation rates. This was misinterpreted as a bear market, but it was largely driven by changes in risk-free rates and future cash flows. A similar dynamic is at play now with President Trump’s tariffs, which have caused stocks to fall.
The Federal Reserve (Fed) is not expected to rush into action despite the strong job growth, as they prefer a cautious stance. However, President Trump has been calling for lower interest rates, which could lead to reckless monetary policy decisions reminiscent of the 1970s stagflation era.
While the jobs report suggests decent employment numbers, it’s essential to consider the long-term implications of President Trump’s policies on inflation and growth. The market is already preparing for a potential recession, and there’s no clear solution in sight.
The bond market will likely set interest rates, rather than the Fed Funds Rate, which has become increasingly dependent on sugar highs from the stock market. As such, investors should remain cautious and watch for any signs of stagflationary shock due to President Trump’s policies.
Source: https://www.splinter.com/todays-jobs-report-was-good-news-which-is-bad-news-for-trump