• So much for the labor market weakening!

• The market now believes the Fed

• Fed Minutes focus on the strong economy

• But the Fed is still cutting

• Is breaking up Google a real possibility?

• That strong Employment Report has plenty of warts

• Quick Hits

• Where did all the crypto money go?

• Chart Crime of the week

So much for that labor market weakening!  The news of the week was a robust Employment Report that showed stronger payrolls, more people working, and stronger earnings!  What is not to love…other than bonds which were hit hard (higher yield, lower price).  With the central fear (slowing labor market) losing some of its bite, the Fed might not want to cut interest rates as aggressively as thought.  Even though the Fed’s Powell had explicitly told the market to expect 0.50% more in cuts this year, the market was still pricing 0.75%.  But with this latest data, the market realigned itself with the Fed’s outlook.  Looking to March, the market was pricing in around 1.25% of cuts...now it is about 0.75% (not to mention, this week’s note and bond auctions from Treasury were lackluster).  We were modestly worried about the market being disjointed from the Fed.  But this bad news (the market being wrong) was quickly turned on its head…and rightfully so.  If the Fed is going to keep cutting rates while the economy is doing well (more jobs, less inflation), that could be the goldilocks scenario.  Of course, the labor market still has plenty of blind spots (more part-time workers, fewer full-time workers, more low paying jobs, fewer temp workers, etc.).  And we have talked about a possible reacceleration in inflation thanks to global stimulus measures (everyone but Japan).  As far as stimulus goes, China is going about its in about the worst way possible (juicing stocks with no real structural reforms).  It is no surprise the Chinese market tanked after being closed for a week.  The US does not face the same problems, but rate cuts will be slow to help shelter, electricity, and medical prices (to name a few).  Schwab points out that we need to focus on discretionary inflation vs nondiscretionary inflation (instead of Goods vs Services).  This is just another way of pointing out the K-shaped economy.  Of course, the port strike is already over (told you so).  That is one less source of inflation to worry about (not that it really was one).  And just when hedge funds get long the Yen (short USDJPY), they get whipsawed back in the other direction.  This is only relevant in that it creates short-term volatility.  We will try to use this to our advantage.