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How "strong" is the labor market?
The US economy has seen an unemployment rate below 4% for 27 straight months, longest streak since the 1967. The longest streak of below 4% unemployment occurred in 1951 and lasted for 35 months. On Friday, the BLS will release labor market data for May, and estimates believe unemployment will be 3.9%. If unemployment comes in line or below expectations, it would mark the 2nd longest streak in history. Meanwhile, most Americans argue that the economy is getting worse. All eyes are on labor market data on Friday. Source: The Kobeissi Letter, DB
BREAKING: U.S. Banking System >>> FDIC warns that 63 Lenders are on the brink of insolvency due to banks sitting on $517 billion in unrealized losses
This is $39 billion higher than the $478 billion recorded in Q4 2023. The surge was driven by higher residential mortgage-backed securities losses held by banks due to rising mortgage rates. Q1 2024 also marked the 10th consecutive quarter of unrealized losses, an even longer streak than during the 2008 Financial Crisis. As “higher for longer” returns, unrealized losses are likely to continue rising. Source: BofA, The Kobeissi Letter
It's hard to understate just how unprecedented the scale of US fiscal stimulus is at the moment.
Not only is the deficit massive for a non-crisis period, but its financing is almost entirely via very short-term issuance, which has never been the case before in a non-crisis time. Source: Robin Brooks
Bullish sentiment on US equities is through the roof:
In May, 48.2% of Americans anticipated stock prices to increase over the next 12 months, according to the Conference Board Consumer Confidence Survey. This is the 3rd highest reading in history, only below the January 2018 and March 2024 surveys. Over just 2 years, this share has nearly doubled as stocks recovered from the 2022 bear market. Meanwhile, the S&P 500 has rallied a massive 48% since the October 2022 low. Stock market sentiment is incredibly strong. Source: Bloomberg, The Kobeissi Letter
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