iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,599 Blog Posts

Hotter Than Expected Payrolls Data Should Be Bullish for Stocks

I’m going to play the role as an apologists for stocks today. Hear me out.

The past few years has led to the collapse of the Yen vs the dollar. The yen is off by more than 30% in the past 3 years, specifically due to the BOJ’s zero percent rate policy juxtaposed against our grandiose 5.5%. The Yen carry trade is in full effect: borrow in yen for nothing, buy treasuries for 5.25% or ladder up the risk and allocate into equities. Don’t think for a second this isn’t happening.

Now with an American jobs market hotter than expected, it’s very possible rate cuts won’t happen anytime soon. Juxtapose that against the Bank of Canada cutting and the ECB’s first cut since 2019 and you have the possibility of the trend beginning to emerge: euro dollar carry trade.

To confirm this suspicion we’d need to see further weakening of the euro against the dollar, now down just 0.63% against the dollar today.

In short, the economy is booming and the inflation monster isn’t coming back to the levels they once were. There is a great chance, should we remain tight and not coordinate with the ECB, that a European American arb can materialize, creating one of the greatest bubbles in history.

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