Nearly Half The S&P Is Already Down 20% | Ted Oakley

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Ted Oakley (1:30)

Every sector, all 11 are on average down 20 percent from their highs. You're having many days now where you have more new lows than new highs. It looks like it's OK, but underneath it's really not OK. A lot of what's happening right now is people are on hold on spending and buying, doing a lot of things, especially big items. Election has something to do with it. You're probably not going to get much coming out of the Fed here after that.

David Lin (1:57)

It's Friday, October 2nd. We had a bit of a softer jobs report than expected. The economy added 29,000 jobs last month. The unemployment rate actually rose now to 4.2 percent. Interestingly, stocks are up. Risk assets are up today. The S&P is up about 1 percent. The Nasdaq is up 1 in 130 basis points. Gold is down 1 percent. Bitcoin is up 1.5 percent. Treasury yields, especially on the long end of the curve, continued to climb.

So right now, with the softer job numbers and markets pricing in, a lower chance the Fed is going to raise interest rates, the Fed funds rate by the October meeting, which is later this month. So the Fissy and Me Fed Watch Tool is now pricing in a 77 percent chance of no hike. This is basically a 180 flip from last week. Ted Oakley, founder of Oxbow Advisors, joins us now to talk about all of this and the deteriorating breadth of the S&P 500 Why are markets still up, despite the deteriorating economic conditions, which we'll talk about, as well as deteriorating fundamentals of the stock market overall, except just a few tech names. Ted, welcome back to the show. Good to see you.

Ted Oakley (3:06)

Thank you, David. Good to see you.

David Lin (3:08)

A very full agenda today. Lots has happened in the last week. Let's start with today's news. 29,000 jobs added. Economy is showing some weakness around the labor market, as I mentioned before. Unemployment rate now at 4.2%.

The key I want to focus on, Ted, is the possibility of a Fed rate hike by October. Previously, it was overwhelmingly in favor of a hike. Now it's not. What do you think is going to happen?

Ted Oakley (3:37)

Well, I don't know, David. You know, I'm not much of one to guess the Fed. We really don't use them in our investing process too much, other than just knowing where interest rates are.

But it's interesting. A few of those people have come out talking about they may want to go on hold this time. But, you know, the last time, all of them were all in on what they were doing. So I'm not certain they know what they're doing, honestly, if you want to know. So I wouldn't think they need to raise them. And we've got a softer, everything looks softer to us. So raising rates into that, I don't think it's a good idea, but you never know about the Fed. They're usually too late, you know, too soon, too late. They never get anything right. So it's not surprising, whatever they do.

David Lin (4:27)

Well, I think the investment implication would be if the Fed were to raise rates soon, it would raise the short end of the yield curve, which I know you've been long, sorry, you've been bullish on short duration, if I'm not mistaken, and you've been staying away from the long treasuries, which was a good call.