TheBRRR’s GM

Seems like everything has gone south in just a few short days (not on vacation). Following the ouster of U.S. Speaker of the House Kevin McCarthy after punting the government shutdown debacle, markets seem to be equally unsure of the path ahead.

Bond markets tumble amid rising yields, shaking global stocks and challenging central banks, as investors grapple with misaligned expectations.

Mortgage rates surged, leading to a 6% drop in mortgage demand from the previous week and the lowest application levels since the mid-90s.

The U.S. labor market is showing mixed signals, with some indicators pointing to a slowdown and others suggesting continued strength.

The ADP report for September showed a sharp decline in private payroll growth, with only 89k jobs added, a significant drop from August’s 180k. The majority of gains were in services, i.e. leisure and hospitality.

In contrast, the Labor Department's JOLTS report for August showed an unexpected rise in job openings, especially in the professional and business services sector, somehow taken as a “persistently tight labor market”. More revisions are expected.

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Market News

Apple: A Bite Today Keeps the Losses Away?

Several high-ranking executives at Apple are offloading a portion of their company shares. Tim Cook, Apple's longstanding CEO, is leading the way with other senior figures like Katherine Adams and Deirdre O’Brien following suit, with the latter selling Apple shares worth $11.3 million. This divestment news comes this morning as Apple's shares experienced a slight dip in pre-market trading. However, there's a silver lining as Bank of America reported a growth in revenue from Apple's App Store, driven in part by robust data from the Chinese market.

• Tim Cook's Major Sale: Apple CEO Tim Cook filed to sell over $41M of his Apple stock, but still retains ownership of approximately 3.28M shares (with his remaining shares still worth approximately $560M).

• Market Concerns: Apple's share value has dropped by over 8% in the last month, influenced by high interest rates and the resumption of student loan repayments after a hiatus.

• Analyst Downgrades: KeyBanc has downgraded Apple's rating due to concerns about its valuation and anticipated challenges in U.S. sales, given that the U.S. contributes to 37% of Apple's revenue.

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Macro News

Bonds on a Downhill Slope: Skis Not Included

A persistent decline in global government bonds has led to a significant rise in U.S. 30-year Treasury yields. This shift, influenced by the anticipation of prolonged high interest rates to manage inflation and robust U.S. economic figures, has impacted stocks and corporate bonds. The bond market's dynamics, where yields move opposite to prices, have led to asset managers reconsidering their positions.

• Yield Surge: The U.S. Treasury market, a cornerstone of the global financial system, has seen 10-year yields surge by 20 basis points to 4.8% this week. U.S. 30-year yields have reached a significant ~5%, and German 10-year yields have climbed to 3%, levels not seen since the 2007 financial crisis.

• Global Impact: Australian and Canadian 10-year bond yields have risen over 20 bps this week. British 30-year government bond yields have reached a new 25-year peak, surpassing 5%.

• Equity Market Reaction: The rapid changes in the bond market have caused concern in equity markets, pushing the safe-haven dollar to recent highs against major currencies. World stocks have dropped to their lowest since April.

• Central Bank Dilemma: Rising borrowing costs present challenges for central banks as they balance inflation control with a potentially declining economic forecast. This uncertainty is further complicating the bond market, leading to a more pronounced sell-off in long-term bonds.

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Today’s Reader Poll

With mixed signals abound, we will ask a more general question:

Below are the results from last Wednesday’s poll. Interesting how the results flipped from our first time asking the same.

Special shout-out to subscriber “cc” for their poignant comment on our previous poll:

“Government needs to be trimmed back and spending cuts are needed.”

AI Art of The Day

Our fearless leader was married over this past weekend to his beautiful bride, so if you haven’t already, give him some love over on “X” (formerly known as Twitter).

Got feedback? Follow the writer on Twitter @frank_locascio and send a message.

The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.