Remember when buoyed by the ever present specter of QE, stocks would levitate no matter what happened, because “good news was good, but bad news was better”? Well, according to BofA, we are right back where we started.
All news is good news. May’s jobs report – with lower than expected headline jobs growth of 147K, negative revisions of -66K and downward revisions to wages – represents another piece in a string of disappointing hard economic data. Impressively, even though stocks initially struggled eventually they turned around and closed up 0.37% on the day. Clearly, equities continue to respond well to both positive and negative economic data, as the latter leads to a more dovish monetary policy stance.
In other words, while rising rates are good for stocks (and as DB laughably pointed out “The easing in our financial conditions index is one of the most extremes on record, thanks to Fed tightening!”), traders and algos are already looking beyond the current tightening cycle and toward the rate cuts and more QE that will inevitably follow.