| Dear Reader,
Greetings from Japan!
I’m currently visiting the Land of the Rising Sun to catch up with old friends and acquaintances (I was a Research Fellow at Kyoto University in my youth, and I did some of my earliest work as an economist over here).
I’m still keeping tabs on global markets — especially labor markets.
And for today’s episode of Moneyball Economics, I wanted to share exactly why labor is so critical to my research … and how you can use that research to boost your portfolio profits.
Click below to start the video:  Trump's worst financial nightmare
revealed (you can't unsee this ) If you think President Trump, Wall Street or the Federal Reserve have the economy under control … you really need to see this eye-opening video…
A $36 trillion ticking time bomb is about to explode and take the U.S. economy and stock market down with it. This story is unraveling quickly—yet no one is talking about—though they should be, and they soon will be. WATCH NOW. | Video Transcript I'm Andrew Zatlin, and this is Moneyball Economics.
Today's topic is labor. That's right. One of my favorite topics because I am Mr. Labor, I'm on Bloomberg. I forecast weekly jobless claims. I forecast monthly non-farm payrolls. I might be the only one out there doing both at the same time. I'm certainly one of the only people out there who has ever been top ranked for both at the same time.
So why labor? Well, to me, labor is a great way to build portfolios.
And as we approach 2025 and are building our portfolios, I'd like to share with you some of the concepts that I'm going to put into practice. Let me start off with leveling, getting everyone on the same page here.
Let's level the playing field and talk about why labor, and we'll talk about it first academically, and then I want to give you some practical ways to tap into some of the labor signals that I share…
We know that as the economy grows, it creates jobs.
The more jobs, the more wages and salary, the more people spend, the more economic activity, the more momentum, the more jobs, and so on and so forth.
It's a very cool positive feedback loop, and that is why the Federal Reserve is chartered to watch jobs because the Fed wants to have a Goldilocks situation. They don't want an economy too hot that's inflationary. They don't want an economy that's too cold. They want an economy that's growing just right.
And decades and centuries of economic says, well then watch what's happening in the job market, because that tells you whether people are spending money. Or the opposite, whether the momentum has slowed and people are holding back from spending money. Now, the Fed watching this has some tools in their toolkit, primarily interest rates. See if things are starting to slow down.
The Fed can boost the economy a little bit by lowering interest rates.
They can, if the economy's heating up too much, slow it down by again this time raising interest rates. So that interest rate tool is very important.
And so the Fed is always watching what's going on in the labor market, and that means if you knew what the Fed's seeing, you'd have the advantage of knowing when they're going to change interest rates and by how much. You also need to know what's going on in general with the economic cycle when this happens.
Typically, the economic cycle is a boom-bust cycle, and there are stages, there are inflection points, and it's at those inflection points when you're going to see the first moves by the Fed.
Again, if you knew about those moves, if you could anticipate the moves now and then in the near future, you could make a lot of money.
I want to show you how.
So first of all, let's talk about interest rates and the bond market.
Now, interest rates are key, very basic. If you've got a bond, the price of the bond will go up or down depending on what's happening with interest rates. If interest rates are going up, the bond price goes down.
If interest rates are coming down, bond prices are going up, and right now the expectation is we are at a stage in the economic cycle where we're slowing down and so therefore rate cuts. That's all we're looking at.
But there's a question of how much and when. Okay, we know when we just had one and the market did not like it because the Fed was saying we're going to do one. Now, just not sure about next year how much I've been advising folks for a long time.
The labor market is strong, and I've been saying that I don't see a lot of rate cuts next year. This is important. Had you basically known that the Fed was going to reel back on the rate cuts, you would've made easily 20 to 25 basis points or 0.25%.
Does that matter? Well, yeah. If you're managing a billion dollars and you can shave off 0.25%, that's nice money. And if you can do that multiple times during the year, you're sitting pretty, and that is what I provide.
I provide that insight that says, “Hey, rate cuts coming/Rate cuts not coming.”
My prediction for 2025 with the bond market is why bother? I mean, to be honest, there aren't going to be that much in the way of rate cuts. If rates come down, obviously bond prices are going to go up. There's not a lot there.
They're not going to cut that much, which means that your bond prices aren't really going to go up that much. Instead, let's talk about the stock market for a second. So the stock market, well, it's not exactly one-to-one with the bond market, it's not really as beholden to interest rates, but indirectly it is.
So for example, when the market melted down because of what the Fed was doing that had to do a lot with high high tech. High tech wants lower interest rates. They tend to respond a lot when interest rates are moving, but it's also sort of available cash. All of a sudden, all these companies who were invested in bonds had to move that cash a little bit differently because of what the Fed did. Cash was withdrawn. There were no buyers in the stock market and on and on and on.
Okay, there are some practical ways to use what's going on in the labor markets.
Let me share a couple with you… One is quite simply, wouldn't you like to invest in companies who are stepping on the gas?
Meaning if they're growing (and they're growing a lot), they're bringing on a lot of bodies to get to that growth. Okay, so you can use hiring data that I use which says, these are the companies that are growing. They got their foot on the gas, and these are the companies that aren't.
In fact, they might even have their foot on the brakes. Maybe that's a good opportunity to sell those companies, get away from them or even buy some puts. Either way. A very basic opportunities here, managing your portfolio so that if you are a long investor, you want companies that are growing as personified in their hiring today. Okay?
There are a few more practical ways, one of which is HR.
If a company's growing, they need more HR workers to handle that growth. Recruiting, onboarding, managing, you name it. So again, that's a second way we could use some of my labor data. We could look at the companies that are growing specifically their HR departments.
A third way, and again, just practically speaking, would be taking a look at companies that participate directly in the labor market. Kelly Services and Robert Half, they provide workers Workday, they provide a lot of the software tools, a DP. They handle a lot of payrolls.
What I found doing some back testing is that when we are at a stage in the economy where growth is on the horizon, these companies generate the best returns that I've seen during that stage ever, and it makes sense, right?
When companies are in a growth mode, they're starting to onboard, and these companies make fantastic profits because they're going to help with that onboarding.
A lot of money goes in their direction and people aren't ready for it.
All of a sudden, the stocks take off. I mean, right now, there isn't a lot of demand for temp workers, but when that demand returns, Robert Half is going to be in an oversold position and suddenly everybody's going to say, wow, wait a second. Your revenues are growing. I need to get back into you.
So again, I've shared with you a couple of ideas about how we're going to use hiring and labor data to our advantage going forward. I want you to have a wonderful, wonderful holiday season, and we'll get back next year. Talk to you soon.
We are in it to win it. Zatlin out. 
Andrew Zatlin
Editor, Moneyball Economics |
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