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Yahoo
13 minutes ago
- Yahoo
Government data is now in question. Here's where macro investors are turning to fill the gaps.
The firing of the BLS head by President Donald Trump has spooked some macro investors. Trump's nomination of a partisan economist may push investors to rely more heavily on other data. Sources like ADP, Homebase, and MIT's Billion Prices Project have become critical, traders say. No savvy investor makes a decision off a single data point, but there are some numbers that carry more weight than others. For many macro investors, the North Star has long been the Bureau of Labor Statistics, the unit within the Department of Labor that measures, among other things, inflation, unemployment rates, and wage growth. Those in charge of the BLS have long been non-partisan economists, but President Donald Trump's firing of Commissioner Erika McEntarfer on August 1 and his top pick for her replacement, chief economist at the right-leaning Heritage Foundation, EJ Antoni, have many concerned with the validity of future government data, especially as Antoni floated pausing monthly jobs reports. Love Business Insider? Log in to Google and make us a preferred source. It's concerning for macro traders who rely on this data to make their bets, but there are non-governmental data sources that many already use. While helpful, these alternative databases can't replicate the widespread foundation BLS numbers provided for decades, where all market participants worked for the same set of basic facts about the state of the world's biggest economy. Still, traders are ramping up their use of this data in light of Trump's moves. "What's going to be tricky here is how to judge numbers coming out of the Bureau of Labor Statistics moving forward," said Andreas Steno Larsen, onetime macro investor and researcher, on his weekly podcast. He compared the firing to something that would happen "in Latin America" and predicted that investors would "look for alternative sources" to get a second opinion on the official data. Four macro investors pointed to the well-known ADP jobs report, which comes out monthly and tracks payroll from private employers, and MIT's Billion Prices Project as ways to track employment and inflation, respectively, in the US. The investors declined to be named because their firms don't authorize them to speak publicly. Some investors tap datasets that constantly scrape e-commerce prices, such as PriceStats, and track how different products rise and fall over time. This is a useful tool to understand Trump's tariff policies' impact, given the volume of online goods that US consumers buy from overseas. Payroll and scheduling company Homebase tracks more than 150,000 small businesses and produces monthly employment reports. LinkUp has tracked online job postings since 2007. Numerator has become a key source for in-person consumer data at places such as restaurants and home improvement stores. "Given the recent BLS conversations, we've recently seen demand for our data increase," Homebase CEO John Waldmann said in a statement. Not a replacement These alternative data sources are just that — alternative. They were used to get a sneak peek or a deeper look at inflation or unemployment figures that the government would release, not replace them entirely. They also sometimes vary. For example, ADP's payroll figures often diverge from the BLS's monthly jobs report, and MIT's Billion Prices Project can capture inflation trends sooner than the official CPI but is less comprehensive. "We don't see them replacing economic statistics altogether in the near future," said Julie Meigh, the head of ESG & macro research at alt-data platform Neudata, about non-traditional datasets. Even if BLS data becomes less trustworthy, the different macro investors who spoke with Business Insider said they'll still need to use it in some fashion unless there's a structural change in financial products. For example, Treasury Inflation-Protected Securities, or TIPS, change when the Consumer Price Index from the government is announced. For those who have exposure to these types of assets, ignoring the BLS is not possible even if the data becomes untrustworthy. As one trader at one of the world's biggest macro hedge funds said, he was surprised markets weren't more spooked by Trump's firing. Equity markets were near record highs, and bond yields stayed mostly steady. "I think it's clear that institutions are not as strong as many had thought," this individual said. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
16 minutes ago
- Business Insider
Goldman Sachs says the risk of stock-market decline has suddenly spiked
The stock market's hot streak might soon come to an abrupt end, Goldman Sachs said. In a note to clients, the bank said that its equity asymmetry framework — one of its gauges that assesses stocks based on the market environment and the latest economic data — was sending a signal that the risk for a coming stock market drop had increased. According to its model, the S&P 500 now faces a higher than 10% chance of a drawdown within the next three months, and more than a 20% chance of a drawdown in the next 12 months, analysts said. The spike in drawdown risks looks similar to the spike seen during the S&P 500's run-up at the start of the year, the bank said. Goldman's equity asymmetry framework flagged an elevated risk of a drawdown before President Donald Trump announced his slate of tariffs on April 2, which sparked a historic sell-off. "The equity drawdown probability is elevated and has increased recently. Usually levels above 30% give a signal for downside risk to equities, and current levels are nearing those," analysts said. The bank said there were two reasons its model was flashing an elevated risk of a decline: Volatility in the market is low. The VIX has dropped 71% from its peak on Liberation Day. The economy is slowing. In order for stocks to do well in a low-volatility environment, the momentum of the economy needs to remain strong. But that looks unlikely, given looming risks stemming from tariffs, the bank said. Analysts pointed to "worsening business cycle momentum" and recent weakness in the job market, with the US adding fewer jobs than expected in recent months. The bank also thinks inflation is likely to pick up in the second half of the year as Trump's tariffs continue to work their way through the economy. David Mericle, the chief US economist at the bank, told CNBC on Wednesday that he expected inflation to drift over 3% as the effects of tariffs begin to materialize. "This is likely to trigger more Fed easing but it could come with more equity volatility in the event of growth concerns, especially if Fed easing disappoints already dovish expectations," analysts said. Wall Street forecasters have been on high alert for signals of a coming correction as major indexes hover near all-time highs. The S&P 500 is up 10% year-to-date and 29% since its post-Liberation Day low.
CNBC
16 minutes ago
- CNBC
Don't be scared out of this coiled spring of a market by know-nothing naysayers
The following passage was part of Jim Cramer's prepared introduction to Thursday's August monthly meeting of the CNBC Investing Club. Periodically, we are in moments like we find ourselves in now. All over America, there are portfolio managers who, for one reason or another, do not like this market. Maybe they have kept an unusual amount of cash because they were worried about the impact of tariffs on the economy. Perhaps, they thought it was time to stay away from the stock market because there's too much federal debt, and the "big beautiful bill" just made things a lot worse. Maybe they hated President Donald Trump and couldn't imagine stocks rallying, given all the uncertainty he creates while mouthing the useless shibboleth that markets hate uncertainty. Markets hating uncertainty is nonsense. They don't hate uncertainty. I know that because there is never any certainty. It's such a ridiculous construct, but it always sounds good when you write letters to clients or when you come on television and explain why it is difficult to invest. No one ever challenges it. Interviewers just nod knowingly or bother to say "of course." Sure, there are moments like when the Covid pandemic struck or when the Great Depression rolled in that are terrible. But that's not because things are uncertain. It's because things are bad. Those are not good times to buy. They are good times to do nothing but hold some cash and wait, knowing that during the worst period of the last 50 years, the Great Recession from the 2008 financial crisis, you only had to wait four years to make back your money with the S & P 500 , and a lot faster if you owned nothing but growth stocks. That's not that long in the vast scheme of things, especially considering how much you made when the clouds lifted. We are in the polar opposite moment right now. We are in a flat-out good market — one in which, after that benign consumer price index Tuesday (and dismissal of Thursday's hot producer price index), we have Federal Reserve interest rate cuts ahead of us. Put that with a thawing initial public offering (IPO) market and an upswing in mergers and acquisitions (M & A), this fall could turn into one of the best bull markets in history. Sure, queue the usual catastrophe caveats, please, but I need you to know that those who have stayed away, kept too much cash on the sidelines, and are watching what's happening now are beginning to think they have no choice. They may have to buy no matter what because we are almost through the worst of what Trump can give us, the trade and tariff nightmare — and in its place, will be the spoils of the "big beautiful bill," the excitement of some strong IPOs, and the monstrous amount of M & A that are going to engulf us as surely as the drought of deals almost caused us to die of thirst. I am sure that Trump has some tricks that are not yet up his sleeve, but I think he has settled back into his 2016 vibe of wanting higher stock prices as a sign of strength: Welcome back, President Trump. The hardest thing to do from here is to think about how a total dog of a stock, like a Bristol Myers Squibb , might look to another low-valued company, such as a Merck , with a stock that can't get outside of itself. Or how the two parts of DuPont might look to a private equity firm. Or, how a company like Wells Fargo may actually be allowed to buy a smaller series of banks because the bank-hating regulators who are now on their way out let JPMorgan get way too big versus everyone else, including Wells Fargo. (Jim Cramer's Charitable Trust is long BMY, DD, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
