Job growth without inflation. Job growth in the right areas: manufacturing and construction, not just healthcare. Lots of workforce participation but still some slack.
Against it? Tariffs go into effect and the yield curve.
Which animal will prevail in that contest, the bulls or the bears?
I think it's a draw which is why you see such a rush toward FANG - the ultimate anti-Chinese tech trade and toward the defensives even if they aren't even doing that well - witness the shade downs in price targets and earnings per share we got this morning from analysts about Hershey (HSY) and PepsiCo (PEP) , the latter a stalwart Action Alerts PLUS name.
Now I don't want to sound too negative given the fact that the 211,000 jobs created on average these last three months without much inflation is astounding. It's not supposed to be happening. We are supposed to be having tremendous wage pressure and we aren't.
But I don't want to sound too positive because as my friend Phil LeBeau pointed out, the Chinese are putting tariffs on American made cars and that's something that can be significantly negative. Autos are the biggest battleground there is. If the U.S. gets embroiled with an intractable Europe because of the higher tariffs on American made cars than the ones we have here on foreign cars that's a very big negative. Does it undo the positive of the labor report? No. But if you combine that with higher costs of some goods including imported products that have kept prices down in this country, you do get an unfortunate picture. I have said that this may be the cost of trying to get our trading partners to play more fair. But in the interim it can be as negative as the employment picture is positive. The flattening yield curve, historically the sign of a coming recession, is all about the tariffs because there's sure as heck nothing bad about the economy from this job growth number.
What will decide things? I believe the earnings releases that start next week will be incredibly important given the push between tariffs and tens and twos versus employment. Any comment from the Fed Chairman that updates the thinking from last month about the disruption in world trade tempering hikes would help the bullish cause, too, but judging from the minutes yesterday that won't happen, so bring on the earnings to break the tie between the bulls and the bears.