00:00Your takeaway from the jobs report, Jeff, you heard Stephanie, she says the Fed's done, at least under Chairman Powell. What's your conclusion?
00:06Yeah, I think the headline from this report is that it was still showing weakness, but not weak enough to sort of trigger a move by the Fed faster than it was already being priced in.
00:17So, you know, I think this report has a lot in there for both sides of the debate.
00:21I think there's a big government worker distortion going on here.
00:25You see it, obviously, between the split between the headline and the private payrolls, which was showing that the private payrolls is showing some of the weakness.
00:32And I think the big headline and what Stephanie was highlighting is really the Fed's focus on the unemployment rate.
00:37People are looking at that. There's some distortion as well from government workers coming back in on the unemployment rate, pushing that downward, maybe more than is really going on in the underlying economy.
00:47And then the third thing, which we haven't talked about, which I think is really important here, and it's the split between kind of labor markets, growth and inflation, is what we saw in average hourly earnings.
00:57Now, you always have to caveat your view on wage inflation from average hourly earnings because it can be very distorted.
01:03But, you know, it's a little bit of a revision.
01:06You see a little bit higher numbers.
01:083.8 is a good number.
01:11And the key issue here is really on the risky assets side of what does the employment report tell us about markets and market positioning.
01:20And the issue is real wage growth.
01:22And can real wage growth support consumption and take the baton in 2026 from what really supported the economy in 2025, which was the wealth effect?
01:32So if we don't have these incredible gains in terms of the equity markets, in terms of the AI continuation, and that's an if, can real wages kind of support the economy and see that rotation?
01:43You talked about Russell outperforming here.
01:46It's a little bit of, hey, if, you know, you see this broadening in consumption being supported from real wage growth, that can kind of be the new story in 2026.
01:55Which is what a lot of people are banking on, the sort of broadening out.
01:57And we saw that record high in the Russell 2000 yesterday, even with an essentially flat S&P 500.
02:02Are you leaning into that based on the data that we've gotten so far this week?
02:06Well, it's a little early to say this data is enough to reach that conclusion.
02:12And I think you have a lot of kind of other issues associated with that equity market rotational theme, which is a lot of concentration.
02:20And investors really struggling with one of the key issues for the 26 outlook, which is how do I manage my portfolio?
02:27How do I deal with diversifying and finding sources of diversification when I have such concentration?
02:34You know, 40 percent of the equity market valuation in the top 10 companies.
02:38How do we get away from those highly concentrated names?
02:42How do we find diversification in the portfolio?
02:43And the economic, the broad economic support for that would be coming from this notion that you could have an economy that is spreading out the gains and seeing a broader based recovery.
02:54We talk a lot on this program about, you know, kind of the challenges of the K-shaped economy.
02:59And do we see some of that support?
03:01So a little potential hint.
03:03I don't want to overstate that and answer your question.
03:05Probably not enough in this week's data to come firmly to that conclusion.
03:08But it is pushing in that direction.
03:11Jeff, I've got 20 seconds.
03:12I'm tight for time.
03:12Forgive me.
03:13If the Supreme Court rules against these tariffs and we find that out later on today, is that a buy of bonds, a sell of bonds or a shrug of your shoulders and go to lunch?
03:22You know, I think the conclusion here is that we kind of overreacted on the tariff side, right?
03:30We overreacted back in April.
03:32Didn't seem that way at the time.
03:33But the real issue is we've overestimated the pass-through impact of tariffs on inflation.
03:39And so I think it's just kind of taken the heat down on the implications for that.
03:44So maybe the third answer in your proposal there, it's a shrug of shoulders.
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