After a tumultuous decline in the final weeks of September, market technicals were awful and sentiment and positioning bearish. But in each of the past two days, equities rallied strongly, adding >5% to all the major indices.
- the ostensible fundamental catalyst has been the signs that the labor market is softening, but not necessarily in a way that spells recession
- on Tuesday, the JOLTS (job openings) report showed the largest ever drop in job openings (ex-pandemic) with a 1.1 million or 10% drop
- this brought the key (watched by Fed) openings/worker ratio to 1.67 from 1.97, or -0.30 in a single month
- at this pace, the jobs market will fall to 1.0 by October/November. JOLTS has a severe 6 week lag
- on Monday, the ISM manufacturing report showed a sharp drop in both the employment and prices component
- Why is this positive? This is one of the 3 key things the Fed is looking for (other two are slower GDP and slower inflation).
Is there a reason to believe this is more than a "bear market rally"?Given the generally poor win-ratio for rallies in 2022, investors are naturally viewing the gains over the past two days as just another "bear market rally." But there are a few factors to consider and these could argue investors should respect these gai...