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To begin, the US economy added 256,000 jobs in December, or 92,000 MORE than expected. On average, the US economy has added 165,000 jobs over the last 6 months. This marks the highest 6-month average since July 2024, when Fed rate cuts were being delayed. The Fed messed up. Stocks are trading SHARPLY lower after the jobs report, even though it came in STRONGER than expected. At first, this seems to not make sense. Why would the market crash if the US job market is actually stronger than expected? We must first explain what happened in September. Here’s the Fed policy statement from September 2024. The Fed began rate cuts with a 50 bps rate cut for the first time in 2008, we were HIGHLY critical of this decision. Their reasoning was that “job gains have slowed” and inflation was heading to their “2% objective.’ However, since then, the EXACT opposite is now happening. Jobs gains are accelerating and inflation is clearly back on the rise. This effectively destroys the need for any Fed rate cuts. If the labor market is strong and inflation is rising, we need HIGHER rates if anything. Following this morning’s jobs data, the 10-year note yield jumped another 10 basis points. It’s now up 120 basis points since the “Fed pivot” began. Powell described this as something that is “unlikely to last.” The market is fighting the Fed and the Fed doesn’t even know it. Still not convinced? Consumer inflation expectations are breaking out like a meme coin. In fact, after the Fed’s 50 bps rate cut, consumer inflation expectations rose to their highest level since 1980! Just about everyone other than the Fed is now expecting higher inflation. This explains why US financial conditions are now near their easiest levels seen over the last 24 years. Financial conditions are now even easier than previous records seen in late 2020 and 2021. Conditions are easier than when the Fed cut rates to near 0% overnight in 2020. And this brings us back to the chart we have been screaming about for months now. Why are gold prices and the US Dollar rising in a sharp uptrend together? This almost never happens. Because inflation is back, uncertainty is rising, and gold has become the global hedge. Sum it up and the “Fed pivot” is dead. The base case now shows a 44% chance of no rate cuts THROUGH June 2025. Months ago, markets saw 5+ rate cuts in 2025. As interest rate cuts are priced-out, the 10-year note yield is nearing 5%. Do not discount the importance of this. With inflation back on the rise and consumer inflation expectations at 40+ year highs, this brings us to our next question: Are we setting up for a 1980-style rebound in inflation? 2025 will be a wild year. submitted by /u/XGramatik |
Scorpion Capital just released a short report on TransMedics (TMDX) with a $0 price target 😂
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