Transcript:
Tom Vaughan:
Hello, everybody, welcome to Thursday, the S&P 500 was down .36% today, and it was really down a lot more in the morning, and then it bounced back up. And there’s like two different things that happened today that I think are really important to the market. And it’s really interesting, if you watch during the day kind of minute by minute, like, you know, one of my charts here, you can really see what the market is reacting to, and what it cares about and what it doesn’t care about.
And so today, the market opened up, and then it fell right away. And tomorrow is the big jobs report. And so after last month, kind of disaster that happened, just to remind you last month, there was an expectation of a million new jobs, and some rumors that might get to 2 million new jobs. And the market was really struggling with that, because that could be too fast on the reopening and maybe cause of inflation. And then the number came out Friday morning at 266,000 jobs.
And at first, the market went up because in normal times, that means that the economy is growing slower. Well, it turns out that there was actually millions of job openings, just nobody was taking the jobs, which obviously meant that they were going to have to pay more to fill the jobs that they did have, which is exactly what happened, which is an inflationary environment. So with all of those things happening this month, they’re basically looking at last month for May, the expectation was 500,000 jobs, it’s now grown to 671,000 jobs. That’s the current expectation. So you know, we’ll see what happens tomorrow, but I think a lot of people like to kind of sit this out after what happened last month.
So there was some selling that happened there, people probably waiting to see what the actual results really were. But then all of a sudden, the market just took off and came almost all the way back, actually. And that was because there was some conversations about the infrastructure program, and some negotiations that are going on specifically with the White House. And President Biden apparently has said that they were willing to find a different way of funding the program outside of increasing corporate taxes from 21 to 28%. One of the suggestions is to have a minimum corporate tax at 15%. That I know that sounds strange, where you have, hey, it’s already at 21%, why would they do 15%. But what they’re talking about is that even after all of your write offs, and what have you, you still have to pay at least 15%. There’s a lot of really big, very famous companies right now that are paid zero tax period, because of all the write offs that they have. So what they’re suggesting is, instead of having a higher corporate tax rate, let’s say 28%, maybe we’ll have a minimum tax rate that you’d have to pay, no matter what your write offs were, just to be essentially contributing to the country and those types of things. Which I think is kind of interesting, I don’t know how that adds up, or what the dollars are, or what that means, in terms of overall earnings, or what have you. But the market responded quite positively to that, and jumped back up.
And again, you can see that corporate earnings are another thing that the market takes a look at very seriously. So, the jobs report is something that’s being watched very heavily, because jobs are probably and employment itself is probably one of the key aspects of inflation, when that does get really tight, that’s where inflation can really kind of be systemic and continue on longer than something temporary, like they’re talking about. And then obviously, you know, corporate taxation affects earnings, which ultimately is one of the things that drives the price of the stock market. I’d say the other thing that you guys spend the most time looking at is just what the Federal Reserve is doing and saying, and there’s lots of different federal governors to come out and doing interviews and different things. They’re still saying the same things and trying to get through that they’re not going to stop their bond purchases anytime soon. And they’re not planning on raising rates anytime soon for what they’re seeing. But this jobs report could push their hands one way or another.
So that’s why this job report actually fairly important. So we’ll see what happens tomorrow. As far as that goes. Now, the value type stocks did do better, you can see that the Dow was just barely down at all, let’s cut more of the value stocks in it. You know, if you look inside of our portfolios, they did a little bit better than the S&P 500. Just because again, we have a lot more value play in there. When you see the 10 year Treasury yield go up which it went up today, then you basically see oftentimes the value stocks doing a little bit better. So that’s a good thing as far as that goes. So, look forward to talking to you tomorrow. Let’s see what happens have to this job report. Thank you very much.