Here’s Why Today’s Selloff Shouldn’t Scare You Out of the Market
In light of today’s turbulent market, I decided to throw out our usual playbook. In today’s Market 360, I’m going to share the transcript of a Special Market Podcast that I sent to my premium readers earlier this morning.
Now, usually, my podcasts are reserved for my paid-up subscribers only. But today, I’m making an exception.
That’s because, as you’re probably aware, the Labor Department released an absolute dud of a jobs report this morning. And it’s sending shockwaves through the market.
Economists expected 104,000 new jobs in July. Instead, the Labor Department reported just 73,000. But what really, really set everybody off was the downward revision of the May and June payrolls by a cumulative 258,000 jobs.
These are massive revisions, folks. And, unfortunately, this has been a recurring theme. In fact, I even said this morning that “somebody should stick their tail between their legs and leave.”
As it turns out, President Trump isn’t waiting around for someone to do that. In a social media post this afternoon, he said that he directed his administration to fire Erika McEntarfer, commissioner of the Bureau of Labor Statistics.
Meanwhile, President Trump hit dozens of countries with new tariffs after the August 1 deadline for negotiations. Dozens of countries (including major trading partners like Canada) will be slapped with rates that range from 15% to 40% (though the baseline remains 10%) and will take effect in seven days.
Still, as I explain in the podcast, there is a silver lining to all this.
Treasury yields have plunged, with the 10-year falling more than 14 basis points. That adds pressure on the Federal Reserve to follow market rates lower – something Governor Waller called for before this week’s meeting.
In fact, markets are now pricing in an 80% probability that the Fed will cut in September. You can see the wild swing compared to just a day (or a week) ago in the table below.
Source: CME FedWatch Tool
Now, as I explain in today’s podcast, I highly advise you not to look at the market daily during volatile times like this.
What’s important to understand is that we’re on the cusp of “economic nirvana.” All the ingredients are there. We simply need to ride out these seasonal shenanigans in the meantime.
In fact, as I explained in a recent briefing, I think we’re on the cusp of a historic boom, fueled by one of the most ignored sectors in the market.
You can get more details on that here.
In the meantime, to further discuss the disappointing jobs report and its ramifications, you can read the full transcript of this morning’s Special Market Podcast below…
Why Today’s Disappointing Jobs Report Is Weighing on the Market
Okay, now you know why I hate August, folks. Welcome to this very seasonally weak month. Unfortunately, I have to admit there is a good reason the market’s going down today, and that is the Labor Department can’t count payroll jobs. Period.
Here’s what happened: they reported that there were 73,000 jobs created in July. That was below economists’ expectations of 104,000, and the unemployment rate rose from 4.1% in June to 4.2% in July.
But what really, really set everybody off was the downward revision of the May and June payrolls by a cumulative 258,000. Specifically, June payrolls were revised down to only 14,000, previously 147,000. So, that’s a massive revision. And May payrolls were revised down to only 19,000, down from 144,000.
So, what a freaking mess. Treasury yields are collapsing today, so that’s the silver lining. The 10-year Treasury yield, as I talk to you, is 4.25%. It’s down over 12 basis points. We did have a successful Treasury auction yesterday, so that was good. But the shorter-term rates are coming down too, and the Fed can’t fight market rates.
Fed Missteps and Trump’s Response
So what Christopher Waller, one of the Fed governors who dissented on Wednesday, what he said is right. There are problems in the job market. He sensed that, he was reading the data. And of course, the Fed doesn’t follow the data. That is what’s so frustrating.
Now, just so you know, President Trump had a delayed response to the FOMC (Federal Open Market Committee) statement. But yesterday, he caught up. He said, “Jerome ‘Too Late’ Powell, a stubborn moron, must substantially lower interest rates now.” Then he added that, “If he continues to refuse, the board should assume control and do what everyone knows has to be done!”
Okay, so President Trump is calling for a mutiny on the Federal Open Market Committee. I don’t know how they make Jerome Powell walk the plank, but that’s what President Trump is calling for.
More Tariff Twists
That’s one surprise we had from President Trump. Another one is even though a lot of the tariffs are now official – they’re official as of [August] 1 – there were a couple of little twists.
We’ve talked earlier about the mess in Brazil, but at least he exempted aircraft parts and orange juice. But, he is using tariffs as a way to conduct foreign policy, and he still wants President Bolsonaro in Brazil to stop having prosecution, but we’ll see what happens.
The twist that kind of rattled the markets was Switzerland. They were paying 31%, but as of today, they’ve got to pay 39%. Now you’ve got to realize the Swiss are very precise. Yes, I know they make watches, but they’re very precise, disciplined people. And for the tariff to go from 31% to 39%, that caught them flat-footed. So, obviously somebody’s making calls.
The other one is Canada. Now, we have this thing called USMCA (U.S. – Mexico – Canada Agreement) with Canada and Mexico, and that dominates the trade. Trump negotiated that in his first term. But that’s going to be renegotiated next year.
But outside of the USMCA agreement, Canada’s tariffs just jumped from 25% to 35%. Just so you know, Canada, via Mark Carney, the prime minister, followed what Germany, France, Britain did and called for a Palestinian state to be created. And that seemed to tick off President Trump.
He didn’t get mad at Keir Starmer, the prime minister of Britain, but he got mad at Mark Carney, the prime minster of Canada, for saying that.
These two apparently don’t get along. President Trump likes to make everybody uncomfortable when he negotiates. And Carney is a globalist. This guy’s got citizenships in Ireland, the UK and Canada. He’s a globalist, and that’s not who President Trump gets along with. So, that’ll be interesting.
Earnings Still Delivering
Otherwise, earnings are working for us, folks. Yesterday a lot of my Growth Investor stocks gapped higher. It was pretty darn good for us this week.
In fact, I just did an analysis of my Growth Investor letter’s performance, and we were up when the S&P was down. So earnings are working for us, but it is August. It’s going to get bumpy. So we’ve got to hang on for dear life.
If you want to take profits, you’re welcome to do so. In my case, I have so many embedded long-term capital gains, I’m going to ride through this.
Most of the time, I will sell stocks if I see analyst cuts, or if I see margins under compression. So, I do fine-tune my portfolios as earnings season goes on. But by and large, we’re still letting the earnings come out and dropkick and drive the stocks higher.
So hang on. It’s just going to get bumpy, it’s as simple as that.
Wrapping Up
The returns in the last four months are unbelievable. I’m very pleased. This has been a lot of fun. But I’m glad to see the earnings are there. And I’m glad to see we’ve got bond yields falling now. And I’m glad to see the Fed is going to have to follow market rates lower.
It’s just unfortunate that the rest of the FOMC did not see what Governor Waller saw. Of course, there was one other Fed governor, Michele Bowman, who agreed with Governor Waller.
So hopefully the FOMC is going to do the right thing, because this payroll report today was a disaster. Whatever’s going on in the Labor Department with seasonal adjustments and all, somebody should stick their tail between their legs and leave because it’s just not reliable anymore. That’s that.
So, with that said, that’s why the market’s got up on the wrong side of the bed. This is obviously a Friday, it’s a weekend. Traders like to clean out their inventory, so I don’t see a significant bounce today. But maybe we’ll get one next week.
I do want to remind everybody: The grand finale this earnings announcement season will be NVIDIA Corporation (NVDA) in a few weeks. And then shortly after that will be Costco Wholesale Corporation (COST), and I expect good returns from both, good earnings announcements.
Sorry it’s summertime. I hope you have a nice trip planned. And I would highly advise you not to look at the market daily, because you’ll get sick. But if you look at when you got in a long time ago, hopefully you’ve got these huge, embedded capital gains and I want to ride through this, because I don’t want to pay the taxes. Simple as that.
So, with that said, it’s Louis Navellier. Enjoy the weekend, everybody. I’ll keep talking during fast market conditions.
One Last Thing
Earlier, I mentioned that a handful of companies have been granted “emergency status” by the Trump administration.
Why?
Because they’re sitting on reserves of minerals that are key for America’s future.
In fact, just days after taking office, President Trump signed a directive that laid the groundwork for a new kind of national investment strategy.
And even though it hasn’t made headlines yet, I believe it’s one of the most important federal initiatives of the past decade.
See, I believe the U.S. government is planning to invest directly in these companies through a sovereign wealth fund – or what I like to call a MAGA Fund.
I just released a new report with all the details – and you need to see it for yourself.
Click here now to watch my full briefing now.
Sincerely,
Louis Navellier
Editor, Market 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Costco Wholesale Corporation (COST) and NVIDIA Corporation (NVDA)
The post Here’s Why Today’s Selloff Shouldn’t Scare You Out of the Market appeared first on InvestorPlace.
