Failure

The President’s failure to suppress the virus’s spread through strong, consistent national policies and Speaker Pelosi’s failure to make a deal with the Treasury Secretary for a new round of stimulus (so far) have now hit the tape in the form of a deceleration in hiring this past month.

September’s jobs report came out this morning, and it’s not good…

Job creation slowed to 661,000 with 7.9% unemployment last month, suggesting labor-market improvements from the coronavirus downturn are moderating as employers confront a prolonged period of uncertainty.

Economists expected employers had added about 800,000 jobs in September and that the jobless rate had dropped to 8.2%. The payroll gains added to the 11 million jobs recovered after 22 million were lost in March and April at the beginning of the pandemic, but also marked the first month since April that net hiring was below 1 million.

And now that the President, First Lady, Hope Hicks and God knows who else in the White House have the disease, the public’s perception that this thing is nowhere close to over (and, in fact, totally out of control) will only heighten the anxiety. Hope Hicks could turn out to have been a super spreader at the highest office in the land. The President’s people and supporters don’t wear masks in his presence as a show of loyalty to his rhetoric, which is obviously insane, but here we are.

I talked about being prepared for this “air pocket” in the economy based on the failure to get a new stimulus bill passed over the summer. It appears that the air pocket is now here.

They’ll hit the “reopen” stocks hardest, which may drag everything down in their wake (No! Not my cloud names!), because that’s what happens when expectations are violently adjusted overnight. Expect margin calls.

The Federal Reserve is out of the picture. They have already pushed their chips into the pile, with no expectations of rate hikes through the next few years and a much higher tolerance for inflation (if it ever shows up) than prior policy had indicated. This is now baked in as a given.

So what’s left?

Earnings season begins within a few days, with the banks reporting first.

Then vaccine approval news, which I have been expecting to happen before the election (within 30 days from now).

And then stimulus, which is increasingly looking unlikely as the clock ticks away and congressional recess approaches.

These are all potentially positive catalysts for stocks, and maybe the thing that prevents a revisit to the spring lows.

I’m writing this pre-market with futures lower. Will the buyers be able to get past the headline shocks we were delivered this morning?

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