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Trends & Analysis
News

Week Ahead Preview: 20th of May

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Walmart’s stock hits record high on Q1 results

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Crude oil rises on US supplies, inflation data

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Another nice quarter for NVIDIA?

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Alibaba delivers earnings miss, shares slide

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USD edges lower ahead of key economic reports

Trends & Analysis
News

Week Ahead Preview: 20th of May

News

Walmart’s stock hits record high on Q1 results

News

Crude oil rises on US supplies, inflation data

News

Another nice quarter for NVIDIA?

News

Alibaba delivers earnings miss, shares slide

News

USD edges lower ahead of key economic reports

Asset Watch

Long-term concern for the S&P 500?

Thursday, June 15, 2023

As the S&P 500 attempts to retrace its 2022 losses, the mood music has shifted on Wall Street. With inflation slowing and the Fed closer to the end of its rate-hike cycle than the beginning, the fundamental catalysts that plagued the index in 2022 have receded. However, maintaining the inflation progress could create another headache for the S&P 500.

 

Job openings are often a leading indicator of a resilient economy but with wage inflation running hot, the Fed needs to cool the labour market to reduce output inflation to its 2% goal.

Chairman Jerome Powell said in May 2022:

“You can see that there’s a labour shortage. There aren’t enough people to fill these job openings. And companies can’t hire, and wages are moving up at levels that would not be consistent with 2% inflation over time… There’s an imbalance there that we have to work on.”

The important part to remember is that the S&P 500 has followed JOLTS job openings for the last 20+ years. The blue line below tracks the S&P 500, while the red line below tracks JOLTS job openings. If you analyse the right side of the chart, you can see that the S&P 500’s recent surge contrasts JOLTS’ weakness. If the Fed successfully reduces the metric to its pre-pandemic level, the red line would fall substantially.

So, will the S&P 500 confront long-term trouble, or is the relationship poised to break?


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