A Message So Important, It Couldn’t Wait Until Tomorrow

by Andrew Zatlin

I’m sending you this video earlier than usual.

Why?

Because tomorrow, the market will take a dive…

And I want you to be prepared.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

A Message So Important, It Couldn’t Wait Until Tomorrow

Last week, I told you to expect a major selloff. And it’ll happen tomorrow.

Today, I’m doubling down on this forecast.

And I’ll explain why I’m confident it’s almost here.

Did Powell Get a Sneak Peek?

On Wednesday, Federal Reserve Chairman Jerome Powell threw cold water on the possibility of interest-rate cuts in March.

Why the pessimism? There’s cause for speculation, to be sure. But I believe Powell got a sneak peek at tomorrow’s payroll numbers…

And those numbers are the key to Friday’s market selloff.

Let me explain…

The Consensus Has It Wrong

You see, the market has been following the narrative that the economy is weakening. And as a result, we’ll see rate cuts soon.

The thing is, I’ve been saying the exact opposite. Based on my research, the economy is strong. And that puts me at odds with the consensus.

Consensus is expecting weak information to be reported tomorrow when payroll figures are released. But make no mistake: I expect this figure to be super strong. And I’ve got three reasons why…

‘Tis the Season for Strong Payrolls

First, there’s the issue of model mechanics. You see, we often get a strong payroll number in January. Take a look:

 

Going back to 2012, January payroll figures have reached 300,000 half the time. That’s a strong number — for reference, consensus is forecasting 170,000 tomorrow. That’s a number so low, it’s only happened twice in the past 12 years.

The thing is, this strong payroll figure to start the year isn’t by accident. On the contrary — it’s by design.

January is prime layoff season. Seasonal retail workers are usually let go. And poor weather results in a release of workers in sectors like construction and trucking. Essentially, each year, almost three million people are laid off.

But to arrive at the payroll number, that expected three-million figure (the number of people expected to be let go) is offset with a three-million seasonal adjustment. And the difference in those figures is how the payroll number is reached.

It sounds confusing, but it’s essentially a way of looking at how few people were fired in a given month. This time of year, that difference is generally larger than what most “experts” forecast, which is why I think we’re in for a bigger number.

Jobless Claims Are on the Way Down

Second, I’m projecting only a few layoffs this season. Let me show you why:

 

If you notice, jobless claims are at a four-month low. And they’re trending down. Companies have been retaining their workers and using who they have to run their “lean and mean” businesses.

Furthermore, as companies were trimming the fat, they didn’t hire many people in the second half of 2023. In fact, hiring activity last year was the second weakest in the past decade. And fewer hired people translates to fewer fired people…

Which brings me to reason No. 3…

No Need to Let Go

One reason companies aren’t big on firing right now is because they don’t have to fire.

Remember, the economy is stronger than what most experts think. Gross Domestic Product for Q4 2023 was 3.3%, the second-strongest quarter since 2021.

Corporate profits are up, and companies are humming with minimal staff. There’s no reason to rock the boat and let people go. That’s why you can expect to see strong payroll numbers tomorrow.

In a moment, I’ll explain how we can take action as investors. But first…

Keep an Eye on Wage Growth

It’s not just payrolls that the stock market is watching. Wage growth is important, too.

The market wants to see wage growth hovering around 3%. But in California and other states, the minimum wage is set to jump more than 5%.

This jump, combined with a strong payroll number, is going to upset the stock market. And the selloff will begin. How can we get prepared?

You’ve Got a Few Options

You could buy puts and cash out tomorrow when the market falls.

You could rotate your investments. Keep in mind that the high-tech sector hates high interest rates. Consider selling some high-tech stocks and investing elsewhere.

Or you could keep some investing cash on the sideline — for now, at least. I expect the market will drift for the next month or so, and that’ll offer some intriguing buying opportunities.

Let me be clear: I still expect 2024 to be the “Year of the Bull.” But starting tomorrow, we’re going to have to weather a market storm. So get ready.

We’re in it to win it. Zatlin out.

In it to win it,

Moneyball Economics