Bloomberg Surveillance: Earnings, Labor Market, and Global Economic Disorder

Earnings Season and Market Outlook

• 📈 Earnings season is proving incrementally stronger than expected, with double-digit growth modeling up 15.6% for the S&P 500.
• 💡 Despite strong earnings, the market has not surged due to underlying concerns and a desire to set the table for 2026.
• 🚀 A rotation out of some tech names into value and small/mid-cap stocks began in late October/early November, but technology is expected to regain leadership due to its waiting in the index and sufficient negative sentiment to overcome.
• 💰 The market is looking for revenue growth to sustain nominal GDP, with S&P 500 revenue growth projected to be north of 7%.
• 🏦 Corporate America is increasingly deploying free cash flow to shareholders, accelerating due to a macro backdrop of potential Fed rate cuts and stimulus.

US Labor Market Dynamics

• ⚠️ The US labor market is showing mixed signals, with a slowdown in immigration impacting sectors like construction, home health care, and food manufacturing.
• 📉 The hiring rate is at its lowest level since 2012 (excluding a brief pandemic moment), typically seen when unemployment is around 8%, making it feel like an 8% unemployment economy for job seekers.
• 🧑‍💼 While the overall unemployment rate is low, the low hiring rate concentrates pain for young people and those needing new jobs, though real earnings are at record levels for those with stable employment.
• 🤖 AI's role in the labor market is not yet visible in current data; the low hiring rate predates public AI launches and is attributed to post-pandemic overhiring and slower workforce growth.

Global Economic Disorder and Trade Fragmentation

• 🌎 Eswar Prasad's book, 'The Doom Loop,' argues that economics, domestic politics, and geopolitics are feeding into a negative feedback loop, leading to global disorder.
• 📉 Globalization is fragmenting, with trade and financial flows increasingly aligning with geopolitical blocs, deepening rifts rather than bridging them.
• ⚠️ Tariffs pose a significant risk, impacting consumer welfare and prices, and contributing to a shift from efficiency to resilience in global supply chains.
• 🌐 Businesses are retreating from lean supply chains, prioritizing resilience, which leads to higher costs, less choice, and exacerbates geopolitical instability.
• 🇪🇺 Europe has the potential to be a great power but faces challenges in overcoming internal political divisions to deregulate, increase productivity, and achieve greater economic and political union.

Market Trends and Consumer Behavior

• 👟 A Nike SB Dunk Low x Kirkland sneaker collaboration with Costco, initially priced at $135, saw resale prices skyrocket to $1,000 due to exclusivity and unique design elements like the Costco hot dog insole.
• 💊 The weight loss drug Ozempic is leading to a trend of clients needing extensive wardrobe alterations or purchasing entirely new wardrobes, impacting the tailoring industry.
• ⚠️ Super Bowl scams are prevalent, with fake emails, texts, and social media ads targeting last-minute ticket buyers; consumers are advised to use reputable sources and digital tickets.