A Robust Job Market – Good News Is Bad News

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In his Daily Market Notes report to investors, Louis Navellier wrote:

Market Struggles Post-Powell

The market struggles to find a new equilibrium post-Powell.

Futures were up nicely pre-market and it looked like we were headed to a partial recovery from the sharp correction that occurred as soon as Jerome Powell announced his willingness for the economy to suffer pain in order to conquer inflation. Instead, the market has continued to fall into the red shortly after the open.

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The further correction this week after the major gap down last week has been on remarkably low volume; Moday was the 2nd lightest volume day of the year. We've gone from an overbought status to a modestly oversold situation in a short two weeks driven primarily by higher bond yields.

Helping to support share prices despite the current weakness is a huge increase in share buybacks, with the Russell 2000 seeing an increase of 137% in the last 12 months. In addition, cash dividends are up 13%.

Energy prices continue to be a major factor with energy stocks still up 7% in August despite crude oil being down 4% thanks to natural gas being up 10%. Gasoline prices have continued to drop which has resulted in less consumer inflation fears, reflected in today's Consumer Sentiment Index jumping to 103.2 vs the 97.4 forecast.

Good News Is Bad News

Today, we also saw the Jolts Job Openings number come in better than forecast; 11.2M vs 10.3M, reflecting a continuing robust job market, but is another case of "good news is bad news" because it gives the Fed more room to fight inflation with higher interest rates.

Finding Equilibrium

For now, stocks continue to drift lower, the VIX and interest rates are drifting higher, and the market is groping for a new equilibrium that will bring buyers back.

Companies with below market P/E multiples who have demonstrated continued earnings growth that are getting caught in this downdraft are on sale and should be picked up quickly as soon as the new equilibrium is reached.

Coffee Beans

The US generates the most revenue for pet foods out of any country in the world. Based on the Statista Consumer Market Outlook, US pet owners are expected to spend around $54 billion on pet food in 2022. Pet food sales are expected to see an average annual growth rate of 8.5 percent from now until 2027, when they are forecasted to hit $80.75 billion. Source: Statista. See the full story here.