what the heck is he smoking it's been a long time since I saw a CNBC movie title as silly as this one on Wall Street Jeff is welln David zervos says that the August jobs report which came out on Friday showed that there were 20,000 fewer jobs than expected the unemployment number went down but not as much as was thought he also says you'll laugh at this adding that it wasn't bad enough to get a good reaction if Wall Street thinks this we're lost there's a good jobs report coming out soon so I won't play this clip because it would waste your time that's how I started this movie because it sums up what's going on on Wall Street right now I like both bulls and bears and when I'm bearish the markets go up there are some people in the world of douu it's now good to have a strong jobs number it's not good right now to get a sad job report things are back to normal when I'm feeling too sure of myself I like optimistic views more than negative ones our side isn't too hard to play right now because so many Market forces are against us October is worse than September during election years even though September has been the worst month for stocks over the last 10 years plus the jobs report on Friday was very bad so that's not a good place to be think about building things they have been going down since February with only small rises in April and May like most things that happened during recession they have fallen apart since May the Wall Street Journal says that the company uses a 3-month moving average to tame regular changes the economy added an average of 116 ,000 jobs in the 3 months ending in August this is less than the 141,000 jobs added in July this average shows that the economy has been going down very quickly over the last 5 months now speed or the cobes letter according to Challenger statistics posted on Thursday the number of layoffs in the US Rose by 193% from 25885 in July to 7541 19 in August Wall Street tried to play Down the most recent jobs report which was for July instead of August by saying that higher rates of employment were due to more people starting to work in Hurricane Barrel in June but that's hard to argue with based on last week's numbers in fact this chart isn't kept up to date if it were it would be way off to the right at 175,000 which is way above anything you saw at the end of 2022 when a lot of people thought we were going into a slump if you look at this figure you can see that the previous High Point was around 155,00 job cuts at Challenger we're now at 175,00 000 bubble cracked I think LMS could be useful but as you can see above I also think that our standards have been way too high in the past and we are now at the highest point of those expectations in the short run the markets don't look good each month from 1.8 million or 18 million to 200,000 or 2 million their chart is strange these charts are falling every month there are probably a million or 2,000 of them that could be why AI stocks aren't doing well September is the worst month month October during election years is a bad month we just got some pretty mixed downwards tilting data in September I mean has already started off on a bad note we're heading into the First Fed rate cut September 18th and most of Wall Street right now has the mentality of you should sell the first cut because in fact the Goldilocks period during fed hiking cycles and then cutting Cycles is actually after the first after the last hike but before the first cut so the last hike that we' seen was July of 2023 we've had 14 months of this Goldilocks period and we've seen what stocks have done they've done very well now you're heading into the first cut from the fed and that's usually a moment in which you want to fade that you want to fade that you want to have some protection on your portfolio you want to be in more cash than maybe other times you're you're normally not and again most of the time stocks sell off after the first cut from the fed that's what a lot of Wall Street is starting to say now is stocks can actually fall after the first cut from the fed and that is coming right around the corner right around the corner it is September 8th tomorrow is September 9th the Fed cut is literally 9 days away less than two trading weeks away from today yeah I I'm not that optimistic in the near- term for markets also see a big disconnect like a massive disconnect I've never seen anything like this to be honest and I've been in and I've been in the market since 2016 20117 started to you know really get into markets around then where you have an economic Outlook that does look more negative now than it did before but the Market's just unwilling to price in any downside potential any chance of a recession or any chance of EP PS that comes in a little on the light side like earnings estimates are at all-time high still for 2025 that is a little ridiculous okay because the the upshot there is what if we're pricing in 15% EPS growth for 2025 you need like 20% EPS growth for 2025 to impress investors that's crazy if you're thinking about the sp500 as a whole grows EPS by 20% like seriously with with the economic data that we're seeing it's not like we're money printing right now you know things are not very accommodative to say the least were 225 basis points in restriction if you judge neutral at 3% for the federal funds rate like that's really the backdrop you want to be expecting 15 to 20% EPS growth for 2025 no even been a lot of bullish fund managers recently have said earnings estimates are too high for 2025 and we're going to take a look at this clip that from CNBC that basically says the same thing that's right the NASDAQ is expected to go down for a whole year and a half and this is its worst week since January 22nd part N9 thanks Chris Tumi from Morgan Stanley thanks for coming back what do you think well the last time we saw the economic numbers they were kind of like Goldilocks as Apple they were giving the Federal Reserve exactly what it wanted what we saw was prices getting out of hand and we thought that something would have to be done to bring things back down for example we had a bad employment number at the beginning of August and some good ones in between but I think the biggest thing that's changed is that bad news is now just bad news while good news is no longer great news so good news is is now bad news so you had is it was good news bad news and I would argue that all we've gotten is it seems like we're acting like the economy is in a tail spin but the numbers show otherwise for example if you look at earnings they're actually pretty good the most recent mags numbers were not bad either Steve always leans on the job number and he looked at it for a moment and said it's not bad right but the market is acting like it's terrible so I would say the economic data is not bad everything is priced just right so if it's not great it must be bad the price was strange so I'm not sure if the market thinks the data is bad I think the economic data is good I I think we're starting to get into a conversation as to whether the FED is going to blow it or or or whether they already did no doubt noou right because I mean the thing is we're in a situation where they've kind of thread the needle here with regards to kind of moderating growth bringing down inflation raising up unemployment and the Market's been doing well but the problem is is that you know we're at an elev Ella place for rates we were just in a period where we had 15 years of zero interest rate environment and there's about a 6mon drag before they start cutting rates right and so in a situation where markets are priced for Perfection they're expecting the FED to continue to be able to defy gravity and maybe that's not going to happen and so that has to be priced into the market all right so we recalibrate we need to recalibrate absolutely but that doesn't mean we need to completely fall out of be either well I mean you know what it is I mean it's it's you know stairs up elevator downright so the market gradually goes up it keeps kind of getting into this positive feedback loop of everything is going to continue as it is and then all of a sudden it's like wait a second this isn't happening and we get the elevator down right and so that's the reason why you have to be cautious when the market moves as aggressively as it has without any of these pullbacks part a part of your point and and I again it's like parts of the market took the stairs up big Tech didn't take stairs up they took a rocket ship and now they need to come back down to earth a little bit the problem is we don't know how much well I mean I think we do I mean look if you look at it from a pricing standpoint you you've got rates coming down so the equity risk premium is actually becoming a little bit more attractive you're in a situation where they're continuing to provide great earnings in our view it's a situation where you still want to own these names you just want to own them at the right price and so in our View Market had to come back a little bit you were going to expect to see the mag7 get hurt and drag the market down and all the other names that have been benefiting from it over the last 18 months and now now is the opportunity where you can start looking selectively at opportunities whether it's in the 493 right or looking at some of these Max 7 names and say look I didn't own these names when they were at this level but now they're at a more reasonable level we can start owning these things is that what you're thinking about for your clients absolutely so I mean look we've been waiting for this pullback we've been sitting on cash we've been collecting the types of income that we like to collect but we thought the markets weren't really Justified with the right the right type of risk that were in there and so that now the prices are coming back