雅虎香港財經 There may be an economic shark in the water for investors: Morning Brief
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Surprises for investors have come from a few places this year.
For starters, I would wager most people sitting on gains in Nvidia, Microsoft and Alphabet had never heard of generative AI back in December 2022. And if they did, no way did they anticipate the hype around the nascent technology and explosive stock price gains.
Yet here we stand with the top five stocks in the S&P 500 (think: Nvidia, Microsoft, Google) now accounting for about 22% of the overall index thanks to these big gains, the most concentrated the index has been since at least 1980, Truist co-chief investment officer Keith Lerner tells me.
It's wild.
Another surprise was the banking crash several months ago.
Who in the world expected a wave of all-out bank busts. Credit Suisse owned by UBS? Crazy!
Where the surprises haven't come from is on the economic front, which is interesting in light of the Fed's aggressive rate hikes making their way through the housing, auto and consumer sectors.
The economy has chugged along — albeit at a slow pace — but hasn't shocked the markets.
But those lack of economic surprises could change soon as the Fed eyes potentially two more rate increases this year. Said surprises may start on the jobs front, argues veteran Morgan Stanley economist Ellen Zentner.
"We forecast a significant slowdown in monthly non-farm payroll growth this year that falls below the 90k replacement rate in 4Q23, and bottoms in January 2024 at 40k before gradually improving to 72k/month in 2024," Zentner said in a note this week that deserved a lot more attention than it got (hence, we are discussing it in these pages).
Zentner thinks we could get the first negative headline payrolls figure for this cycle in September.
If it were to happen, it would mark a big-time slowdown from the 300,000 average pace of job creation we have gotten year to date.
The markets will unlikely take a negative headline jobs number well, Zentner contends. Investor attention may quickly shift to renewed fears of a recession at the hands of an inflation-fighting Federal Reserve.
"On a negative payroll print this year, risk-off sentiment in financial markets may soar, especially as investors remain on recession watch despite the strengthening soft-landing story," Zentner says.
The Fed may not be so quick to act by cutting rates on a drop in jobs, warns Zentner.
Another thing investors won't want to hear.
Written off surprises for 2023? Don't.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com
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