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an employment number that's strong but not too strong was just what this crazy market needed today although it took half the day for wall street to figure that out dow going down at first but then eventually finishing up 572 points s p gaining one point nine five percent nasdaq advancing 1.55 it was it was a hidden goldilocks support let's call it that a lot more people are getting higher thanks to the vaccine rollout in the opening uh but uh not so many that the fed will feel compelled to raise interest rates and some are really being left behind why does that matter because the bond market is calling the tune right now and when the bond markets please meaning treasury yields are stable as they ended up today or even go lower didn't get that buyers rush into the stock market because they know the competition from bonds will remain benign a benign bond market serves as an all-clear signal for the stock market bulls now this has been a confusing time for fixed income investors because the whole narrative on the economy changed practically overnight we went from a period of stagnation where we were propped up by government spending to the beginning of what could be a potential boom as more people get vaccinated and washington gets ready to throw more fuel in the fire if the economy is poised to get so much better why the heck do we need the federal reserve to keep giving giving us easy money right interesting question and that is the bomb what we call the bond vigilantes position they want rate hikes they think the economy is too hot i get that however fed chief jay pal insisted he won't tighten anytime soon because so many people are being left out of potential come back the inflation is really just nascent and could go back down and even though he's been very right on the economy so far the bond vigilantes have decided he's just some dove in a suit who's going to create a tsunami of inflation with his stance i think they're wrong i think j-pal is right but i'm not the one who controls the bond market i keep telling you this moment feels like the period from november 2015 to february 2016 when our old fed chief janet yellen looked at the dashboard of the economy very similar right now saw some inflation indicators flashing red like we have right now and decided it was time to raise rates even though she appeased the bond vigilantes and gave a sample warning the economy was crushed and stocks took a hit and that's what i fear i fear repeated that time and i am staying not as a vigilante but i'm staying vigilant powell refuses to be count but the bond bullies who are very powerful don't believe it the feds had a zero tolerance policy toward inflation for my whole career these guys can't imagine something there's this guy pal who would charge a new course no matter how many times he explains it now the session opened rocky because lots of investors bought stocks with borrowed money over the last week so margins nearing a record high here and they got blown out by this week's decline and a sharp initial move up in rates in reaction to that employment number but then rates reversed and we got one of those loose bottoms i've been talking about where we have a sharp decline fueled by force selling and then the market swiftly rebounds when that selling is over if the bonds rally and uh interest rates fall and that's what happened so we out of the woods no that's just one day's worth of a scenario not so fast the battle is far from over with lots more collateral damage particularly by the way i don't have you noticed but the highest gross stocks even today and the myriad spax they're still being taken out and shot despite the nice backdrop basically everything was red hot a month or two ago is not so great so here's how i see it playing out whenever we get good news for the economy like when the senate passes the stimulus package or when we get big vaccine benchmarks the bond vigilantes will come out of the woodwork with the same playbook that you saw earlier this week they will dump bonds pushing long-term interest rates higher and triggering more weakness in the stock market like we saw yesterday the only thing that will stop the bond buoys is weaker economic data especially lower commodity prices like oil copper lumber plastic and paper that hasn't happened yet but if you got those lower then the heat's off pal
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