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Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

JOLTS & SP500 Data Divergence - 9.27.23

Our macro framework places a significant emphasis on employment, and it's straightforward why: 34.6% of Americans have 401(k) contributions. For our international audience, Americans can contribute a maximum of $22,500 annually to a 401(k), with many employers typically matching 50 cents for every dollar. In essence, if you're employed and contributing to your retirement, you're sending monthly deposits to firms like Vanguard and Blackrock for equity purchases. It might sound reductive, but that's why we see the correlation in our chart today: rising job openings (or full employment) correlate with a rising S&P 500, and vice versa.

A few notes on JOLTS data: It's not without its challenges. Firstly, the data is delayed; we expect August's figures on October 3rd. JOLTS are the laggiest of all the laggy data. Employment data, in general, lags the broader economy. Secondly, recent survey response rates have been disappointingly low, undermining sentiment readings' accuracy. Lastly, Danielle DiMartino Booth and Mike Green have discussed this a lot: the BLS JOLTS data counts all advertised job openings. For instance, a company like Delta Airlines can advertise for a potentially non-existent position across all 50 states, each counted as a unique opening, thereby inflating the JOLTS figures. It’s an effort to poach top talent from competitors. The irony is that the FED, which uses this data for policymaking, has documented these issues in its own reports.

The takeaway from today's bonus chart? As JOLTS data (blue) trends downward, the SP500 (red) has some catching up to re-align with this correlation.

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