The Job Market Is Getting Weaker, But Stocks Are Booming: What’s Behind the Disconnect?
As America's job market continues to deteriorate, with employers hiring at a steadily lower rate and laying off workers at a rising one, it might seem like stocks should be taking a hit. Instead, they're hitting record highs.
But there are two reasons why this is happening, according to experts. Firstly, the Federal Reserve's interest rates have been influenced by the slowdown in job growth, which has led them to cut rates rather than raise them. This makes stocks more attractive, as lower interest rates and inflation boost economic demand and prices.
Secondly, many of America's top tech companies are no longer heavily dependent on American consumers, but rather on global sales and future cash flows from emerging technologies like AI. These firms' value is not directly tied to near-term changes in consumer demand, so a slowdown in the US job market won't have as big an impact on their shares.
In other words, investors are betting that we're in for a modest rise in unemployment, not a deep recession. And with inflation running at 3 percent and interest rates already low, stocks are benefiting from this scenario. The tech giants' value is more closely tied to their future profits, which will be driven by the success of AI companies over the next decade.
Of course, investors could still be wrong. America could be sliding towards a prolonged stagflation that keeps interest rates elevated and profits low, even for AI companies. And if consumers have less disposable income to spend on chatbot subscriptions, it could put a dent in OpenAI's plans for global domination.
Despite these risks, Wall Street seems to be more optimistic than rational at the moment. The fact that an economically illiterate authoritarian is consolidating power over the US government – while sabotaging its international credibility and domestic functioning – might have negative implications for American business in the long-term.
But for now, investors are focusing on the short-term prospects of tech companies and ignoring the potential risks of a prolonged economic downturn. As one expert notes, "the value of all firms... is not determined solely by their near-term revenues."
As America's job market continues to deteriorate, with employers hiring at a steadily lower rate and laying off workers at a rising one, it might seem like stocks should be taking a hit. Instead, they're hitting record highs.
But there are two reasons why this is happening, according to experts. Firstly, the Federal Reserve's interest rates have been influenced by the slowdown in job growth, which has led them to cut rates rather than raise them. This makes stocks more attractive, as lower interest rates and inflation boost economic demand and prices.
Secondly, many of America's top tech companies are no longer heavily dependent on American consumers, but rather on global sales and future cash flows from emerging technologies like AI. These firms' value is not directly tied to near-term changes in consumer demand, so a slowdown in the US job market won't have as big an impact on their shares.
In other words, investors are betting that we're in for a modest rise in unemployment, not a deep recession. And with inflation running at 3 percent and interest rates already low, stocks are benefiting from this scenario. The tech giants' value is more closely tied to their future profits, which will be driven by the success of AI companies over the next decade.
Of course, investors could still be wrong. America could be sliding towards a prolonged stagflation that keeps interest rates elevated and profits low, even for AI companies. And if consumers have less disposable income to spend on chatbot subscriptions, it could put a dent in OpenAI's plans for global domination.
Despite these risks, Wall Street seems to be more optimistic than rational at the moment. The fact that an economically illiterate authoritarian is consolidating power over the US government – while sabotaging its international credibility and domestic functioning – might have negative implications for American business in the long-term.
But for now, investors are focusing on the short-term prospects of tech companies and ignoring the potential risks of a prolonged economic downturn. As one expert notes, "the value of all firms... is not determined solely by their near-term revenues."
. Why r stocks doing so well wen job growth is going down? Its like people think everyone's gonna have plenty of cash 2 spend on AI chatbots 
. But whats really driving this boom? Is it just tech companies being reckless w/ their valuations or is there something else at play? I mean, its not like interest rates are low cuz inflation is super under control 
.
. And let's be real, the current state of politics doesn't exactly fill me with confidence about America's business prospects in the long run 
. But hey, I guess that's just how the market works - short-term focus and all that 
. Still, it'd be nice if investors could see a bit further down the line 
.
. But still gotta wonder if investors are just making a bet that unemployment will rise but not super much and AI companies will still kill it in the future 
. Like, I get why the tech companies aren't super worried about the US job market since they're making most of their cash from global sales and future AI profits 
. But hey, we'll just have to see what happens next, right? 
. But in this case, it feels like Wall Street is just ignoring all the potential downsides and focusing on the short-term gains 
. Can someone please explain this to me? 
, but job growth is basically grinding to a halt 
. It's like the market's expecting some sort of mild recession, which just doesn't add up to me 
... if you're not directly tied to consumer demand, your value is more stable 
. But for the rest of us, this all feels kinda sketchy 
. I mean, who's really in control here? 
Can we at least get a clear layout around this story? Maybe some simple bullet points or something? 
but let's be real, we're all just waiting for the other shoe to drop 
. But what's going on with the job market? We're seeing layoffs rising and hiring slowing down... shouldn't that be a concern for investors? 
The disconnect between the job market and stocks is indeed a puzzling phenomenon. With interest rates being cut due to slowing job growth, it's amazing how investors are still bullish on tech companies. Maybe they're thinking about the long-term prospects of AI and global sales? But, as one expert said, "the value of all firms... is not determined solely by their near-term revenues." 
.
we're the ones who actually have jobs and are getting laid off left and right. how's that supposed to boost our morale?