“Everyone wants to live on top of the mountain, but all the happiness and growth occurs while you’re climbing it.” ― Andy Rooney
Chart of the Day
Good morning!
The latest example of why the economy feels so off came yesterday.
ADP private payrolls said that the number of jobs added grew last month. But the creation isn’t coming out of predominantly AI-related industries, which is a little shocking considering that investors are betting on AI advances to become a primary driver of economic growth.
I get that it’s the point of the AI revolution – to not need more jobs and have the same number of employees do more. But it’s also incredibly rare to see so much money being poured into an area of the economy, especially during the early stages where you’re laying out the bones, and have it not lead to an increase in jobs.
My take is that’s one of the biggest reasons why few feel optimistic right now. You can’t be excited about stocks trading just below all-time highs when you fear that you’re going to lose your job.
Data released Wednesday showed that the U.S. economy added 42,000 jobs in October, coming in better than expectations of a 22,000 increase and higher than a loss of 29,000 jobs seen in September. On the surface, this is great news for the labor market, especially since we haven’t had data from BLS due to the shutdown, and it is likely what drove the S&P 500 to finish up 0.4% yesterday.
What sectors can we thank for the jobs increase? The group of trade, transportation, and utilities, aka sectors that reflect the old school economy, noted a 47,000 increase in jobs. That was followed by the education and health services industry adding another 25,000 jobs.
But — and please cue some emo music — information services lost 17,00 jobs, while professional and business services saw a 15,000 decrease. That’s disappointing considering that billions have been spent on building out AI infrastructure, and no one can shut up about how AI will create new types of jobs.
Of course, it’s entirely possible that even the increase in trade, transportation, and utilities jobs have something to do with AI expansion because ADP doesn’t provide specific breakdowns. But here’s the thing: Even those 47,000 jobs are nothing to write home about.
Which company isn’t announcing job cuts as of late? It feels like I need to create a tracker, just like we did for AI circular investments, because it’s becoming hard to keep up. Just within the last month, there’s been thousands announced at UPS and Target, as well as Amazon, with more to come there, according to Amazon Chief Executive Andy Jassy.
And more importantly, there are worries that most of the job cuts recently are companies trying to flex the AI buzzword, even if they aren’t actually replacing that many workers with AI.
That’s a big reason why bearish sentiment remains elevated, according to the Association of Individual Investors survey, even though the S&P 500 is 1.4% away from all-time highs.
The percentage of net bulls over bears is down 11.1% this year. Double-digit negative sentiment like that has typically only been seen during years when the stock market has declined, not when it’s at records.
Fresh data coming out today can shed some more light there, but it’s likely going to be hard to reverse this much bearish sentiment, at least in the upcoming few weeks.
During weird moments like this, it becomes all the more important to focus on long-term signals, which in this case is that the long-term AI supercycle remains intact.
Corporations are expanding their margins, while paying a greater majority of tariffs, arguably showing that AI has already started to improve productivity. Our Head of Research Tom Lee discussed even more signs during our annual conference yesterday, including thinking about distributional consequences, robotic systems, use of blockchain, and more.
[Editor’s note: A replay of the Fundstrat Annual Forum will be available shortly.]
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Can you recall a time when a sector grew without adding jobs? Click here to send us your response.
📧✍️Here’s what a reader commented📧✍️
Q: Will Fed policy be influenced by concerns over recent credit-related losses?
A: Tricolor was a government=sponsored fraud from the start. Much like the great financial crisis of 2008 was a government mandated fraud scheme for “under privileged” home buyers. Tricolor ‘s core business (subprime auto lending) is a market with very little law or regulations. Thus, the company’s ability to engage in fraudulent activity like double-pledged collateral. These, while large losses, are not remotely close to the “too big to fail” institutions of past. So, while banking system liquidity is a concern (hence stopping QT), these subprime losses are merely a blimp and nothing of macro concern.
Catch up with FS Insight
Investors are seeing a constellation of worries, which is prompting many to sideline. But a wall of worries is how markets stage subsequent gains.
Technical
Near-term U.S. equity trends are bullish, and Wednesday’s recovery helped to carve out a short-term trading low despite a few days of consolidation since late October.
Crypto
Yesterday’s crypto rally was driven mainly by spot demand, not short covering. Open interest rose as funding rates declined, and a brief Coinbase premium indicated strong U.S. buying.
News We’re Following
Breaking News
- Treasury yields dip as Supreme Court justices cast legality doubts on Trump’s tariffs CNBC
Markets and economy
- Brussels opens probe into Deutsche Börse and Nasdaq over derivatives FT
- Bank of England holds rates at 4% and tees up December cut BBG
- AI pioneers claim human-level general intelligence is already here FT
Business
- Google’s rolling out its most powerful AI chip, taking aim at Nvidia with custom silicon CNBC
- Fed-up Starbucks baristas prep ‘biggest strike we’ve ever been on’ for Nov. 13 BBG
- JPMorgan hit with record fine from German finance watchdog FT
- Charles Schwab to buy forge global, boosting client access to private markets BAR
- Elon Musk’s $1 trillion pay fight — and other things to expect at Thursday’s Tesla shareholder meeting YF
Politics
- GOP senators hold firm on filibuster after Trump’s hard sell POL
- Mamdani taps antitrust crusader Lina Khan to help lead transition WSJ
- FAA says it will list airports where it is reducing flights during the government shutdown AP
Overseas
- France to suspend Shein sales after finding childlike sex dolls, weapons WSJ
- Deadliest typhoon in Asia this year targets Vietnam after leaving a trail of destruction in the Philippines CNN
- Mexico president to seek charges after being groped on street BBC
Of Interest
- Burger King braces for the demise of the penny WSJ
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| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 11/6 | 8:30 AM | 3Q P Nonfarm Productivity | 3.4 | 3.3 |
| 11/6 | 8:30 AM | 3Q P Unit Labor Costs | 0.85 | 1 |
| 11/7 | 8:30 AM | Oct AHE m/m | 0.3 | 0.3 |
| 11/7 | 8:30 AM | Oct Unemployment Rate | 4.4 | 4.3 |
| 11/7 | 8:30 AM | Oct Non-farm Payrolls | -20 | 22 |
| 11/7 | 10:00 AM | Nov P Oct P UMich 1yr Inf Exp | 4.6 | 4.6 |
| 11/7 | 10:00 AM | Nov P Oct P UMich Sentiment | 53 | 53.6 |
| 11/7 | 11:00 AM | Oct Sep NYFed 1yr Inf Exp | n/a | 3.38 |
| 11/11 | 6:00 AM | Oct Sep Small Biz Optimisum | n/a | 98.8 |
