David Bonachea Martinez @bonacasino: "🚨 How can the stock..."

Spain

🚨 How can the stock market rise when employment data is bad? This is one of the most common questions I'm seeing after the latest U.S. jobs report. And yes, at first glance it seems contradictory. The U.S. economy lost 23,000 jobs in July, when consensus expected approximately +83,000. On top of that, May and June were revised down by another 103,000 jobs. So… why is the market going up? The first explanation is fairly well known: Bad jobs data → less pressure on the Fed → higher probability of lower rates → more favorable financial conditions → stocks higher. Correct. But I think we're only getting half the story. Because when we talk about the market, we're not talking directly about the economy. We're talking about companies. And here's the part I find interesting. A company doesn't make money simply by hiring workers. It makes money when it manages to produce and sell more than it costs to produce. So if a company can maintain its level of output — or even increase it — while hiring fewer workers, we're looking at a completely different scenario. Less hiring doesn't have to mean lower profits. It can mean: ➡️ Higher productivity ➡️ Lower labor costs ➡️ Higher operating margins ➡️ More earnings per share And this matters especially in an environment where companies are investing heavily in automation, software and artificial intelligence. Imagine a company that two years ago needed 1,000 workers to generate $ 100 million in revenue. Now it generates that same $ 100 million with 850 workers. From the worker's perspective, that's a negative. From the company's income statement, it can be exactly the opposite. And the market values that income statement. That's why I think we need to be careful with headlines like: "Jobs data is bad, therefore the stock market should fall." Not necessarily. The really important question is: Is the deterioration in employment actually causing corporate earnings to fall — or are we seeing an economy that needs fewer and fewer workers to generate the same growth? Those are two radically different scenarios. There's obviously a limit. If the labor market deteriorates enough to cause a significant drop in consumption, revenues and corporate profits, the market will stop reading bad jobs data as a positive. But as long as earnings remain solid and productivity allows companies to do more with fewer resources, a weaker labor market can coexist perfectly with a rising stock market. The market doesn't buy jobs. It buys future earnings. And that difference is fundamental to understanding why a negative economic data point can, paradoxically, be positive for stocks. Not financial advice. $AMZN (Amazon.com Inc) $SPCX (Space Exploration Technologies Corp) $GOLD $GOOG (Alphabet) $SPY (State Street SPDR S&P 500 ETF)

Not investment advice. The author may have financial interests in the mentioned instruments.