Why Did Stocks Close At A Record-High After Disappointing Jobs Report?

Published Friday, December 4, 2020 at: 8:30 PM EST

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Stocks closed at a new all-time high today despite a bad surprise on the employment situation. What's driving stocks?

The combination of a weak bond market and Covid economic conditions are key pieces in today's puzzling investment news.

Friday morning's Bureau of Labor Statistics' release that 245,000 jobs were gained in the U.S. in November, was down from 610,000 in October, and lower than the 457,500 new jobs that economists expected. That was a bad surprise.

Interestingly, it triggered a spate of negative headlines. While major media outlets rang alarms bells, the stock market looked past it. Why?

A revaluation of the stock market may be required due to the poor outlook for the other major asset class – bonds.

With long-term bond yields low, inflation at 1.2%, government aid is a cheap and practical way to solve the economic problems facing America in the Covid crisis.

Money supply -- the cash held in savings, money markets and short-term instruments, has gone parabolic due to Covid relief payments and the lower-expense American lifestyle during the stay-at-home Covid period. With additional aid payments from the U.S. government expected to further boost M2 and, thus, savings of Americans, a market melt up is a risk.

Timing a market is impossible but understanding financial economic drivers of asset classes is not.

The Standard & Poor's 500 stock index closed Friday at a new all time high of 3,699.12. The index gained +0.88% from Thursday, +1.65% from a week ago, and +49.24% from the March 23rd bear market low.

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