In last week’s NFP (non-farm payroll) report, the US added 517,000 jobs in January, higher than expected and pushing the unemployment rate down to 3.4%, its lowest since 1969.
Job growth was revised higher for November and December, adding an additional 71,000 jobs.
The strong job growth may not be welcomed by the Federal Reserve, which is looking to slow job gains and wage growth to reduce inflation and pause its interest rate hike campaign.
The Federal Reserve raised its interest rate target by 0.25% last week, and plans to continue raising rates with the aim of bringing inflation down to 2%.
However, investors believe the Fed may cut rates back to current levels by the end of next year.
The recent surge in crypto saw a rebound in Bitcoin and Ether by 51% and 47% respectively.
The shift in trading patterns shows a pullback from retail investors and a rise in the influence of institutions such as hedge funds.
The Big Tech Earnings Season saw a decline in revenue growth compared to 2021 with combined growth of only 7% for Apple, Amazon, Alphabet, Microsoft, and Facebook, compared to 28% in 2021.
The companies are engaged in significant headcount reductions, costing more than 50,000 jobs.
The time for a correction or pullback may be as soon as next week.
The Federal Reserve recently raised its interest rates by a quarter point, signaling that more rate increases are on the horizon.
Despite this stance, investors are betting on only one more quarter-point increase, with some suggesting that the Fed may even cut its target range back to its current level by the end of next year.
This disconnect between the Fed’s message and what investors believe it will do poses a problem, as a drop in long-term interest rates and a stock market rally could hamper the Fed’s efforts to control inflation.
The Fed’s past behavior is partly to blame for this disconnect, as in previous cycles, it has tended to start cutting rates shortly after it finished raising them.
However, the Fed’s actions will depend on inflation and employment in the coming months.
There is a risk that investors may see the central bank’s hawkish talk as mere jawboning and that the Fed itself doesn’t believe its own message.
Despite the Fed’s recent rate hike, the S&P 500 and Nasdaq Composite closed 1.1% and 2% higher, respectively.
The stock market has been rallying since October 2022, with the S&P 500 up 17% since then and 8% since the start of the year.
There are conflicting opinions among experts on what this means for the future of the market.
Michael Burry predicts a second round of inflation spike when the Fed cuts interest rates again, while Nassim Taleb believes that the next 15 years will be harder than the previous 15 due to higher interest rates.
On the other hand, Mark Spitznagel predicts a major market crash as bad as the Great Depression.
A deeper market crash may be possible, but it is not visible at this point in time.
Historically, US midterms have resulted in positive S&P 500 performance, with a 7.3% increase after three months, a 15.1% increase after six months, and a 16.3% increase after 12 months.
Additionally, a recession is not correlated with S&P 500 performance and stock market performance after a recession is usually bullish.
The Fed has hiked rates by 450 basis points in just 10 months, far more than what was initially expected.
Ongoing rate increases will be necessary to get inflation back to the 2% target over time, with at least two more rate hikes projected in the future.
If the economy performs as expected, there will be no rate cuts this year.
The Chairman of the Fed, Powell, emphasized that there is still more work to be done with respect to inflation control and monetary policy.
The risk of doing too little is difficult to manage, while over-tightening can be addressed with available tools.
The labor market remains extremely tight, and reducing inflation is likely to require a period of below-trend growth and softening of labor market conditions.
Financial conditions have been loosening since mid-October after tightening earlier in the year, and the Fed is cautious about declaring victory in controlling inflation, viewing the job as ongoing.
https://synapsetrading.com/wp-content/uploads/2023/02/Thumbnail-Fed-Hikes-Rates-by-0.25-Whats-Next-for-the-Markets.png7201280Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2023-02-04 09:09:332023-02-04 21:42:29Fed Hikes Rates by 0.25%: What’s Next for the Markets?
The Non-farm payroll (NFP) is one of the most watched economic indicator by traders and investors, as it provides insight into the health of the US labor market.
Released on the first Friday of each month, the NFP report tracks the change in the number of employees excluding farm employees, government employees, and non-profit organizations.
It is widely followed by economists, investors, and policy makers and can have a significant impact on financial markets.
In this blog post, you’ll learn about the origin of the NFP, how the data is collected and calculated, and what the key numbers in the report mean.
We’ll also explore how traders and investors use the information from the NFP to make their investment decisions.
Table of Contents
What is the NFP and its Origin?
The Non-farm payroll (NFP) is a measure of the change in the number of employees, excluding farm employees, government employees, private household employees, and employees of non-profit organizations, in the US during the previous month.
It is widely considered as a key indicator of the strength of the US labor market and is released by the Bureau of Labor Statistics (BLS) on the first Friday of each month.
The NFP report has its origin in the early 20th century when the US government started collecting data on employment and labor force characteristics.
The NFP report was established as a regular monthly release in the 1940s and has since become an important economic indicator used by economists, investors, and policy makers to assess the health of the US economy.
How is the Data Calculated?
The NFP data is collected and tabulated by the Bureau of Labor Statistics (BLS), which is a branch of the US Department of Labor.
The BLS uses two surveys to calculate the NFP: the Establishment Survey and the Household Survey.
The Establishment Survey, also known as the payroll survey, collects data from a sample of approximately 141,000 businesses and government agencies and covers roughly one-third of all non-farm employment in the US.
The survey collects data on the number of employees on payrolls and the number of hours worked by each employee.
The Household Survey, also known as the survey of households, collects data from a sample of approximately 60,000 households and covers the remaining two-thirds of non-farm employment in the US.
The survey collects information on the employment status of individuals, including those who are unemployed and looking for work.
The NFP data is calculated as the difference between the total number of employed persons in the Establishment Survey and the Household Survey in the current month compared to the previous month.
The NFP data is seasonally adjusted to account for regular patterns in the labor market, such as seasonal hiring during the holidays.
What are the Key Numbers of the NFP Report?
The Non-farm payroll (NFP) report released by the Bureau of Labor Statistics (BLS) contains a number of important data points that traders and investors pay attention to:
Non-farm payroll employment: This is the main number in the NFP report and is a measure of the change in the number of non-farm jobs in the US during the previous month. A positive number indicates job growth, while a negative number indicates job losses.
Unemployment rate: This is the percentage of the labor force that is unemployed but actively seeking work. A lower unemployment rate is typically seen as a sign of a strong labor market, while a higher unemployment rate is seen as a sign of weakness.
Average hourly earnings: This measures the average pay per hour of all non-farm employees and is an important indicator of wage growth and inflationary pressures. A significant increase in average hourly earnings can signal an increase in inflation, which can lead to higher interest rates and a stronger US dollar.
Participation rate: This is the percentage of the civilian non-institutionalized population that is either employed or actively seeking work. A lower participation rate can indicate a lack of job opportunities, while a higher participation rate can indicate a strong labor market.
Average workweek: This measures the average number of hours worked per week by all non-farm employees. A decrease in the average workweek can indicate a slowdown in economic activity, while an increase can signal economic strength.
Each of these data points provides valuable information about the state of the US labor market and economy and traders and investors often pay close attention to them when making investment decisions.
However, the relative importance of each number will vary depending on the current economic conditions and the outlook for future growth.
How is this Data Relevant to Traders and Investors?
The NFP data is relevant to traders and investors because it provides valuable information about the state of the US labor market and the overall economy.
A strong NFP report, meaning an increase in the number of non-farm payroll jobs, is often seen as a positive sign of a growing economy and can lead to increased demand for stocks and a stronger US dollar.
On the other hand, a weak NFP report, meaning a decrease in the number of non-farm payroll jobs, is often seen as a negative sign of a slowing economy and can lead to decreased demand for stocks and a weaker US dollar.
Traders and investors pay close attention to the NFP data and may adjust their portfolios in response to the report.
For example, if the NFP report shows strong job growth, traders and investors may increase their investments in stocks, while if the report shows weak job growth, they may decrease their investments in stocks and instead invest in safer assets such as bonds.
In addition to the overall level of job growth, traders and investors also pay attention to other details in the NFP report, such as the average hourly earnings and the unemployment rate.
These data points can provide further insight into the health of the US economy and the direction of future monetary policy, which can also have an impact on financial markets.
News Trading on NFP Data
Here are specific examples of how traders might use each of the data points from the NFP report to make trading decisions:
Non-farm payroll employment: Traders might use the non-farm payroll employment number to assess the overall health of the US labor market and economy. For example, if the NFP report shows strong job growth, traders might see this as a positive sign and increase their investments in stocks, as a growing economy is generally seen as supportive of corporate profits. On the other hand, if the NFP report shows weak job growth, traders might decrease their investments in stocks and look for safer assets such as bonds.
Unemployment rate: Traders might use the unemployment rate to assess the strength of the labor market and the potential for future interest rate changes. For example, if the unemployment rate is low and declining, traders might expect the Federal Reserve to raise interest rates in order to keep inflation in check. This could lead to a stronger US dollar and a decrease in demand for riskier assets such as stocks.
Average hourly earnings: Traders might use the average hourly earnings data to assess inflationary pressures and the potential for future interest rate changes. For example, if the average hourly earnings are rising faster than expected, traders might expect the Federal Reserve to raise interest rates to combat inflation. This could lead to a stronger US dollar and a decrease in demand for riskier assets such as stocks.
Participation rate: Traders might use the participation rate to assess the health of the labor market and the potential for future economic growth. For example, if the participation rate is declining, traders might see this as a sign of a weak labor market and decrease their investments in stocks. On the other hand, if the participation rate is increasing, traders might see this as a sign of a strong labor market and increase their investments in stocks.
Average workweek: Traders might use the average workweek data to assess the potential for future economic growth. For example, if the average workweek is increasing, traders might see this as a sign of a strong economy and increase their investments in stocks. On the other hand, if the average workweek is declining, traders might see this as a sign of a weak economy and decrease their investments in stocks.
It’s important to note that these examples are general and that traders might also consider other factors, such as broader economic and market conditions, when making investment decisions.
Additionally, the impact of NFP data on financial markets can vary depending on expectations and the magnitude of the surprise in the report.
Concluding Thoughts
In summary, the Non-farm payroll (NFP) report provides valuable information about the state of the US labor market and by extension, the overall economy.
Whether you’re a seasoned trader or just starting out, understanding the NFP is crucial to making informed investment decisions.
Traders and investors pay close attention to the NFP data, including the non-farm payroll employment, unemployment rate, average hourly earnings, participation rate, and average workweek, and adjust their portfolios in response to the report.
Now that I have covered all about the importance of the NFP report, is it something that you will add to your trading toolbox?
https://synapsetrading.com/wp-content/uploads/2023/02/Thumbnail-What-is-the-NFP-Non-Farm-Payroll-and-How-to-Trade-it.png7201280Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2023-02-03 12:38:132023-03-21 14:20:19What is the NFP (Non-Farm Payroll) and How to Trade it?
Fortune’s Formula is a captivating book that delves into the world of scientific betting systems and how they have been used to beat casinos and Wall Street.
Written by William Poundstone, an author and journalist, the book uncovers the story behind the famous Kelly criterion, a formula developed by mathematician John Kelly that has been used by gamblers, investors, and even the military to make optimal decisions.
In this blog post, I will share all about this book and the author, key ideas from the book, and how you can apply it to your own trading & investing journey.
Table of Contents
About the Author
Author William Poundstone is a well-known science writer and journalist. He has written several books on a variety of topics including science, mathematics, and technology.
He is also a contributing editor for the magazines Discover, New Scientist, and Scientific American. Fortune’s Formula is his most famous book, which has been translated into many languages and was a New York Times bestseller.
He is also known for his book “Priceless: The Myth of Fair Value (and How to Take Advantage of It)”.
What is the Book About?
The book is about the Kelly criterion, a formula that was developed by John Kelly in the 1950s.
Kelly was a mathematician who worked at Bell Labs, and his formula is a way to determine the optimal amount of money to bet on a given outcome.
The Kelly criterion takes into account the probability of winning and the potential payout. It has been used by gamblers, investors, and even the military to make optimal decisions.
The main message of the book is about how Kelly’s formula has been used to achieve success in a variety of fields, and how it can help people make better decisions in high-stakes situations.
10 Key Ideas from the Book
The Kelly criterion is a formula that helps determine the optimal size of a bet in order to maximize long-term growth.
The Kelly criterion was first described by John L. Kelly Jr. in the 1950s.
The Kelly criterion has been used in gambling and investment.
The book covers the history and development of the Kelly criterion.
The book also covers the various applications of the Kelly criterion.
The book explains how the Kelly criterion can be used to beat the casinos.
The book also explains how the Kelly criterion can be used to beat Wall Street.
The book provides examples of how the Kelly criterion has been used by successful investors.
The book also provides examples of how the Kelly criterion has been used by successful gamblers.
The book shows that the Kelly criterion can be used to maximize long-term growth.
10 Ways to Apply the Kelly Criterion
To determine the optimal size of a bet.
To maximize long-term growth.
To beat the casinos.
To beat Wall Street.
To make better investment decisions.
To make better gambling decisions.
To maximize returns while minimizing risk.
To improve one’s overall financial success.
To make data-driven decisions.
To maximize one’s edge over the market.
Other Important Points from the Book
The book provides a detailed historical account of the development of the Kelly criterion and its applications.
The book also provides examples of how the Kelly criterion has been used by successful investors and gamblers.
The book shows that the Kelly criterion can be used to maximize long-term growth while minimizing risk.
The book is suitable for readers who are interested in gambling, investing, and game theory.
Concluding Thoughts
In conclusion, “Fortune’s Formula” is a comprehensive book that provides a detailed historical account of the development of the Kelly criterion and its applications.
The book is suitable for readers who are interested in gambling, investing, and game theory.
The author, William Poundstone, provides a clear and easy-to-understand explanation of the Kelly criterion, and the book is full of examples of how the Kelly criterion has been used by successful investors and gamblers.
I would highly recommend this book for anyone who wants to learn more about the Kelly criterion and its applications.
Now that I have covered all the key learning points of this book, would you consider adding it to your reading list?
For those who have already read it, what are some of your key learning points?
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“Forex Price Action Scalping” by Bob Volman is a comprehensive guide to the field of professional scalping in the foreign exchange market.
The book provides an in-depth look into the techniques and strategies used by professional scalpers, as well as the mindset and discipline required to be successful in this high-pressure and fast-paced trading environment.
In this blog post, I will share all about this book and the author, key ideas from the book, and how you can apply it to your own trading & investing journey.
Table of Contents
About the Author
Bob Volman is a professional trader with over 20 years of experience in the Forex market.
He is a recognized expert in the field of price action trading, and his books and educational materials are highly respected by traders and investors around the world.
What is the Book About?
The book covers a wide range of topics, from the basics of scalping and price action trading to advanced strategies and techniques for managing risk and maximizing profits.
The main message of the book is that scalping is a highly profitable but also highly challenging form of trading that requires a specific set of skills, knowledge, and mindset.
10 Key Ideas from the Book
Understanding market structure and price action is crucial to successful scalping. This includes identifying trends, support and resistance levels, and chart patterns.
Technical indicators such as moving averages and stochastics can be used in conjunction with price action analysis to identify entry and exit points.
Discipline and risk management are essential to successful scalping. This includes setting stop-loss orders and limiting the amount of capital at risk on each trade.
The psychological and emotional aspects of scalping can be challenging. Traders must learn to control their emotions and maintain discipline in order to be successful.
The use of leverage can greatly increase potential profits, but it also increases risk. Traders must be aware of the potential dangers of using too much leverage and use it with caution.
Scalping requires a high degree of focus and attention to detail. Traders must be able to quickly analyze charts and make decisions in real-time.
To be successful, scalpers must be able to identify and trade specific chart patterns and price action setups.
It is important to develop a robust trading plan that includes risk management strategies and a plan for managing losses.
Traders must practice discipline and emotional control while trading. This includes sticking to a trading plan and avoiding impulsive decisions.
Continuously learn and adapt to market conditions.
10 Ways to Apply the Teachings
Use the information provided to identify and trade specific chart patterns and price action setups.
Implement risk management strategies such as using stop-loss orders and position sizing.
Develop a trading plan and stick to it.
Practice discipline and emotional control while trading.
Continuously learn and adapt to market conditions.
Use technical indicators in conjunction with price action analysis to identify entry and exit points.
Set stop-loss orders and limit the amount of capital at risk on each trade.
Identify trends, support and resistance levels, and chart patterns.
Use leverage with caution and be aware of the potential dangers.
Be able to quickly analyze charts and make decisions in real-time.
Other Important Points from the Book
The importance of backtesting and developing a robust trading plan, as well as the need for a large amount of capital to make scalping a viable trading strategy.
Scalping requires a large amount of capital to be able to take advantage of small price movements, and traders should be aware that the potential for profits is also matched by the potential for losses.
Additionally, scalping is not suitable for those traders who are not comfortable with high-pressure and fast-paced trading.
Concluding Thoughts
In conclusion, “Forex Price Action Scalping” is an excellent resource for anyone interested in learning about professional scalping in the Forex market.
The book provides a detailed and in-depth look into the techniques and strategies used by professional scalpers, as well as the mindset and discipline required to be successful.
It is highly recommended for traders and investors who are looking for a comprehensive guide to the field of scalping. The book is suitable for both beginner and intermediate traders with some knowledge of the forex market.
It is also recommended for traders who are looking to gain more knowledge on how to read the price action in the market.
Now that I have covered all the key learning points of this book, would you consider adding it to your reading list?
For those who have already read it, what are some of your key learning points?
