Dean Smith, chief strategist at FolioBeyond joins Cheddar News. 

Markets Open Low After Sept. Jobs Report

and joining us now to discuss is Dean smith, chief strategist at folio beyond Dean. Welcome to the show. The september jobs report is out. What do you make of the market's reaction to that data so far? Well, it's definitely what you'd expect. The uh, the talk of pivot by the Fed has got to be really off the table at this point. I mean, we're looking at across the yield curve almost uniformly. We starting got four handles the 10 years, a little bit below that, but, uh, rates are going to continue to go up and they're going to stay higher for a lot longer than people thought. Just a short time ago, we've been saying this as loudly and as often as we can. And I think, I think the market is finally coming around to our perspective. And speaking of that jobs report, which specific metrics do you think the Fed is going to be looking at closely in this report concerning determining its policy moving forward? Yeah, the the number that's really kind of confounding here is the labor participation rate. Um, that number has just been getting softer and softer and uh, it's a little bit of a mystery why people haven't been coming back into the labor force wage growth is, is very high. Um, obviously, there's some covid hangover, but um, as long as that labor participation rate continues to soften, there's going to continue to be wage pressure. And that is something that is the Fed is gonna have to continue to battle. And speaking of that wage pressure? What do you think investors need to be watching as they make their own financial decisions in the months moving ahead. Yeah, I mean, we've been, you know, again, continually harping on this. People need to be thinking about risk reduction here. They need to shorten durations, they need to reduce credit exposure. Uh They need to think about preserving capital as opposed to playing for games here. Um We're in for a tough patch, it's not going to be a couple of months, it's liable to be quite a bit longer than that. So, the the mentality of buying the dip and we still hear people saying this like quite frequently, um that is going to prove to be a terrible strategy going forward. You need to be playing for safety here. Now, of course, interest rate hikes have resumed their upward trajectory as we've discussed, but we have had a series of sharp reversals in the overall trend this year. What's driving that volatility? And will we see more of it? Yeah, it's interesting. It's I I blame it on bad policy and worst messaging. Um The rally that we had over the course of the summer from the high in mid june uh, really was pointed directly or came directly from the Feds bad messaging. Uh They allowed the market to get the impression that they were uh not really going to fight the inflation battle the way they needed to and that belief didn't really change until Powell's um Jackson Hole speech in which he spoke very directly and thankfully briefly and said that they were going to break the back of inflation by any means necessary. And then we had this little mini rally last week or so from bad actions, uh bad policy and bad messaging from the U. K. Uh in the tax proposal that was quickly abandoned. Um And so there was a safe haven rally to the dollar and Treasuries there, that's been almost completely reversed as well. So we're up about 100 and 30 basis points now in a 10 year from the lows of the august on that trend is gonna continue. But we will see conditional additional volatility, I'm sure of it. Obviously the Fed's rate hikes not having the expected impact on, you know, the job market, the economy here. So given that and widespread expectations that the Fed will continue to hike those rates, where do stocks go from here? You know, stocks can rally or go down without regard to sort of what's happening with rates there has been, you know, historically this idea that in a 60 40 portfolio, you know, when your bonds were zigging, your stocks were zagging, uh that's kind of broken down here. So um I think again, even with stocks, I think the idea should be to play for safety and try to generate some income from dividends. But this this idea of buying the dip again is really a bad one, of course the Fed treading a fine line here, attempting to, you know, cool that overheating economy without sending into a tailspin and throwing us into a recession. Do you think the Fed can actually manage this balancing act? No, the bottom line is that it's going to be a really rough patch here for the next probably year 18 months. Um you know, the the part, the Alan Alan Greenspan, excuse me, Milton Friedman so famously said monetary policy acts with long and variable lags. The part that people are forgetting is long it takes a while for monetary policy to have the effect on the economy that the policy makers would like it to have. We're gonna be here for a while. Dean, thank you so much for your time and for your insight this morning. That's Dean smith, chief strategist at folio. Beyond