Strong Employment Report To Keep Fed on Hold for Now

The employment report came in strong with the establishment survey registering 228,000 jobs added in March and the household survey showing 200,000 new jobs with the unemployment rate ticking up to 4.2% from 4.1% driven by a higher labor force participation.  These strong numbers are likely to keep the Fed on hold for now.

We continue to be bullish on treasury bonds and reiterate our 3.5-4.0% year end target on the 10-year treasury with the current rate approximately 3.9%.  The fed funds futures market is pricing in 5 rate cuts this year as the market knows that the Fed is incompetent and will have to reverse its current hawkish stance and implement cuts.  Even though the Fed Chair acknowledged that inflation from tariffs is one time and should be excluded, but many FOMC participants don’t seem to understand this.  We do think that the economy is rapidly decelerating due to extremely tight monetary policy and will decelerate further due to the extremely high tariffs imposed on US consumers, which will impact total consumption.   When this economic slow down shows up in the employment data, the Fed will act.  We are neutral/negative on the stock market pending better clarity on the trade war, Federal tax cuts and Fed policy.