(Bloomberg) — Investors have their eyes peeled on Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium this morning. But to Morgan Stanley’s Michael Wilson, the jobs data in early September will be of even bigger importance.
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“It’s about the labor data, period — that’s what’s going to dictate what the Fed does, they’ve said that,” Wilson, the bank’s chief US equity strategist, said in an interview with Bloomberg Television. “And that’s what the market is going to trade off of.”
The S&P 500 Index posted its worst jobs day since 2022 earlier this month, when a weak payrolls report fueled worries that the Fed’s decision to hold rates at a two-decade high was risking a deeper economic slowdown. Wilson, who correctly predicted the downdraft in the S&P 500 back in July, said the stock market is “more vulnerable” to another negative report on the labor market.
“If we get another negative number, the market can react as bad as it did in July at the index level,” the strategist said. “However, a very strong payroll number could reverse that trend” back to more cyclical parts of the market.
In early July, Wilson called a 10% correction in US stocks “highly likely.” Roughly a week later, on July 16, the S&P 500 hit a new high and then proceeded to lose 8.5% before reaching its near-term low on Aug. 5. It has regained about 7% since then.
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