U.S. employment data in September exceeded expectations, which is obviously good news for the economy. Why did U.S. stock become scared and plunged 3.8% in a single day this Friday?
There are several headline readers who have private messages asking this question, and I will reply here.
1
In the long run, the stock market is positively related to the macro economy. The better the economy, the more troublesome the stock market should be. But in the short term, the stock market is more susceptible to monetary policy and interest rates.
The looser the monetary policy and the lower the interest rate, the easier it is for investors to go to leverage stocks at a low cost, thereby driving the stock market to rise; on the contrary, the stricter the monetary policy and the higher the interest rate, the stock market has a downward risk.
Considering the problem from this perspective, we can understand why the US stock market is so afraid of "US employment data in September exceeding expectations"; because the employment data exceeds expectations, it will enhance the confidence of the Federal Reserve's interest rate hike by 75 basis points in November, and the US dollar interest rate will increase significantly again, which is of course not good for US stocks.
2
Another headline watcher may ask: Why does the employment data exceed expectations increase The Federal Reserve's confidence in hiking interest rates in ?
This is because: The Fed's current main task is to suppress high inflation, and one of the main sources of high inflation is the hot job market, which has raised the wages of companies recruiting new employees.
According to data from Horizon Investment Group in the United States: In the current U.S. job market, every job seeker faces an average of 1.7 jobs to choose.
To put it simply, it means that new employees in the United States are in short supply, and major companies have raised their salaries to attract talents in order to compete for resources.
At the same time, because the employment market is booming, there are also many opportunities for employees to change jobs; this makes bosses have to raise their salaries to retain old employees.
In other words, the booming employment market has stimulated the rise in the average salary of American employees; if employees raise their salary, they will increase consumption, which will drive prices to rise, and inflation will not be reduced.
This is also the reason why the core CPI of the United States (the price of goods that removes food and energy) continued to rise month-on-month in August.
Therefore, to curb high inflation, the Federal Reserve is to crack down on the "hot" job market; by raising interest rates, increasing the borrowing costs of enterprises, allowing them to reduce the expansion scale of new businesses, and stop hiring new people or retaining old employees by increasing wages.
When the wages of American employees no longer grow on a large scale and they reduce consumption, commodity prices will fall due to the decline in demand, and the high inflation situation can be alleviated.
3
Of course, the Federal Reserve dares not raise interest rates unscrupulously. If the interest rate is raised too high and leads to large-scale layoffs of companies, it will be more than worth the loss.
Therefore, the Fed's interest rate hike depends on both the inflation rate and the employment rate; maintain a balance between employment and inflation: inflation cannot be too high, but employment cannot be too bad either.
Therefore, when the Fed sees that the "September employment data" is still very popular, it means that the Fed can suppress employment in order to eliminate high inflation; employment is now very good, and there will be no big problems if it is suppressed again.
This is the logic behind the employment data exceeding expectations and will enhance the Federal Reserve's confidence in hikes.
After understanding this logic, we will suddenly become enlightened when we look at the question of "Employment is obviously booming, the economic situation is very good, why are the US stocks so afraid?"
