On the January Jobs Report and the Yield Back-Up
The scare-headline about rising hourly wage growth is fake news. Month-over-month it fell in January. It is narrowly true that the year-on-year growth is the best since the Great Recession, but that’s only because a weak data-point last January was replaced with a slightly stronger one this January. There’s nothing new in this jobs report that should move the Fed’s policy posture “further” to the hawkish. Stocks have reacted by continuing what we think was a long-overdue inevitable correction. But bonds and USD are, and have been, in risk-on mode – they are safe-haven assets that are becoming less valuable in a less deflationary and more risk-on world. Higher long-term yields don’t have to be a threat to equities; historically, higher yields and superior equity returns have generally gone hand-in-hand.