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Yesterday, the Bureau of Labor Statistics released the official October Jobs Report – and it was a dud. The U.S. economy added just 12,000 jobs last month, versus expectations for 100,000 new jobs and far below the September total of 254,000 new jobs. Meanwhile, the August and September job growth numbers were revised lower by 112,000, and the unemployment rate pushed higher from about 4.05% to 4.15%. Across the board, it was a very weak employment report. Yet, the stock market powered higher today to kickstart November on a positive note. Why? Because yesterday’s weak jobs report was exactly what the stock market needed to push higher into the end of the year. What's more, companies like Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOGL), and Meta (META) delivered good numbers the other night that broadly topped estimates and confirmed both the resilience of the U.S. economy and strength of the AI Boom. Despite the October Jobs Report missing estimates by a mile, we liked what we saw out of the market today and remain very confident in the prospects for a post-election rally in stocks. As we’ve been saying for weeks, the fundamental earnings trends underlying the stock market are very positive and highly supportive of continued stock market strength. But those positive fundamental earnings trends have been held back by spiking Treasury yields. Today’s weak jobs report suggests to us that those spiking Treasury yields won’t spike for much longer. We expect the economic data to soften in the coming weeks. That softening – coupled with an election outcome – should push Treasury yields lower. Once those yields move lower, strong earnings trends will push stocks sustainably higher into the end of the year. Let’s just be patient into the election. Then, after Tuesday, let’s see where yields go… Getting the Economy We Deserve Right now, the stock market needs “Goldilocks” economic data – data that isn’t hot enough to re-stimulate inflation, but also data that isn’t cold enough to plunge us into a recession. Goldilocks economic data will ensure that inflation stays low, which will allow the Fed to keep cutting interest rates, which should re-stimulate the economy and help stocks push higher. Recently, though, we’ve been getting economic data that was “too hot.” Take the September jobs report, for example... It was a blowout report that was much better than anyone expected. Ever since then, traders have pushed up their long-term inflation expectations and reduced rate-cut bets, which has resulted in the 10-year Treasury yield spiking from about 3.85% before the September jobs report to over 4.3% today. But the October jobs report wasn’t “too hot.” It was just the right temperature. Sure, the headline numbers missed expectations by a mile. But they were impacted by temporary factors like the Boeing (BA) strike and hurricanes. Excluding those factors, the U.S. economy probably added more jobs than 12,000 last month. But, at the same time, those factors didn’t impact August or September, and those job numbers were revised lower by 112,000. So, in the October jobs report, you had a little bit of good and a little bit of bad. It wasn’t too hot. It wasn’t too cold. It was just the right temperature. And stocks responded with a strong rally. The Final Word Overall, we are encouraged by today’s stock market rally and maintain confidence in our outlook for stocks to rally over the next few months on election certainty, strong earnings, and rising rate-cut hopes. We still think things will be choppy and uneven until next Wednesday. And maybe for a few days after that, too, as the market processes results. But ultimately, once the election angst turns into resolution, this market looks primed to rally higher. Especially AI stocks. Let’s stay patient into next week... We believe the October Jobs Report will mark the start of a big shift in the economic data from “too hot” back to “Goldilocks” levels. If so, then the October Jobs Report could mark the start of a big holiday rally in the stock market. We really like the setup for stocks in November and December. And we especially like the setup for AI stocks in November and December, given the very positive things that companies like Amazon, Meta, Microsoft, and Alphabet had to say about AI this past week. All up, we think good AI stocks are primed for some big gains over the next few months. Click here to check out a few AI stocks we’re following closely in our research services. Sincerely, | 
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