Jobs Shrink, Gold Jumps, and We Chase Neither

This Week in Context

The economy lost jobs. The stock market set a record. Both happened in the same week, and the second happened because of the first.

Friday's report from the Bureau of Labor Statistics (BLS) showed employers cut 23,000 jobs in July, the first negative month in years, against forecasts for a gain of about 83,000. Markets decided a shrinking labor market ends the argument for a September rate hike, and everything higher rates had been holding down rose at once: stocks, gold, silver, Bitcoin.

This book was built for weeks like this one. It does not need to be adjusted by them. Nothing trades.

Macro Landscape

Payrolls fell 23,000 in July, with 53,000 government jobs cut and the prior two months revised down by a combined 103,000. Unemployment slipped to 4.1%, but for the wrong reason: fewer people in the labor force. Wage growth cooled to 3.2%, the slowest in five years.

The counterargument is real. With immigration sharply lower, the economy may need only about 35,000 new jobs a month to hold unemployment steady, down from the old 100,000 rule of thumb. Summer school and the World Cup ending explain much of July's decline, and construction, manufacturing, and technology all added workers, much of it tied to the data-center buildout. A smaller payroll number in a smaller labor force is not automatically a recession signal.

The rate market did not wait for the nuance. Odds of a September hike fell to about 40% from near even, and the 10-year Treasury yield eased to about 4.64%. The decision now hangs on one number: Wednesday's Consumer Price Index (CPI) report for July. Press reports say the new Federal Reserve chair would still push a September hike if the inflation readings come in hot.

the economy lost jobs stocks made a record high both are true, and one caused the other

Sector Spotlight: The Metals Finally Move

Gold spent three months going nowhere. This week it went somewhere: spot gold pushed toward $4,350 an ounce, its best week of the year, and silver ran harder still. Fading hike odds lower the cost of holding metal that pays no interest, and the buyers who never left, governments running deficits and central banks stacking reserves, were already there.

A move like this validates the thesis without changing it. The 13% gold and 5% silver weights were sized in April for exactly this kind of repricing. We take the mark, not a victory lap, and we do not add into strength.

Oil pushed the other way. Crude jumped about 5% Monday, with Brent settling near $88, after Tehran said the American naval blockade must lift before the Strait of Hormuz reopens. Monday's barrel will not show up in Wednesday's July inflation report, but it sets the floor for August's.

Crypto Corner

Bitcoin climbed back above $65,000, joining the rate-relief rally it sat out last week. Two things happened underneath.

First, money stopped leaving the exchange-traded funds (ETFs): thirty-day flows turned positive for the first time in months. The uncomfortable detail is why. Analysts attribute the shift to sellers running out rather than buyers arriving, and spot trading volumes sit at levels last seen in 2019.

Second, the policy catalyst slipped. The Senate left for recess without voting on the CLARITY Act, the market-structure bill the industry has chased all year, filing a first procedural motion on the way out and queuing a floor vote for mid-September.

flows turned positive because sellers ran out that is not the same as buyers showing up

Bitcoin's strength relative to the Nasdaq has been improving since late June, a pattern that has marked past cycle turns, though in the last two cycles both still fell together at the end. Our rule has not changed: we add when demand confirms, not when sellers get tired. Hold the 7%.

Looking Ahead

Wednesday's CPI report is the week's verdict. A cool print buries the September hike and extends this rally; a hot one revives the hike, the strong dollar, and the argument for our 40% in bills. Producer prices follow later in the week.

Mid-September is now circled twice: the Federal Reserve meets on the 15th and 16th, and the Senate has queued the crypto bill for the same week. Between now and then, the Hormuz standoff decides what oil does to the next two inflation prints.

We are paid about 3.8% to watch. The allocation is unchanged: 27% VOO, 8% VWO, 13% GLD, 5% SLV, 7% BTC, 40% BIL.