Labour Market Stronger Than Expected

Market Overview
Read time 0.9 minutes

Year To Date Performances:

1. The U.S. labour market continues to showcase strength. Recent data showed an unexpected decline in initial jobless claims for the week ending August 19, down by 10,000 to 230,000, against a consensus that anticipated a 1,000 rise. Additionally, continuing claims saw a more-than-expected decrease and are nearing six-month lows, implying that those out of work aren't facing significant barriers in securing new employment. On the wage front, data from Indeed indicates a slowing pace of wage growth. Wages that surged by 8% YoY in July 2022 and 5.8% in April 2023 saw a growth of just 4.7% in July, reflecting the slowest increase since late 2021. This deceleration in wage growth, outpacing the decline in inflation, is likely to be viewed favourably by the Federal Reserve.

2. Active fund managers and retail investors have shown declining optimism in the equity markets. Data from the National Association of Active Investment Managers (NAAIM) suggests that active managers have curtailed their equity exposure for the fourth consecutive week, with the NAAIM Exposure Index touching its nadir since October 2022. Similarly, sentiment among individual investors, as indicated by the American Association of Individual Investors (AAII) Sentiment Survey, has tilted bearish, with bearish sentiment surpassing bullish for the first time in a quarter. However, there's a notable surge in interest among retail investors for zero-day-to-expiration (0DTE) options. Cboe Global Markets data posits that retail traders may contribute 30-40% of the 0DTE contract volume, starkly contrasting to earlier approximations of about 5%. The influence of short-dated options on market dynamics remains a topic of debate among major banks. While Goldman Sachs contends that these options magnified the recent market pullback, Bank of America believes this assertion is exaggerated.

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4. Headlines

   1. BRICS is expanding by adding six new nations.

   2. Zillow has launched a new service allowing Arizona residents to buy homes with just a 1% downpayment.

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