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Education Series: Single-Stock ETPs

September Payrolls Show Job Market is Still Strong

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

The highly anticipated Nonfarm Payroll report, which is published on the first Friday each month by the U.S. Bureau of Labor Statistics showed that the U.S. economy added 263K jobs in September 2022, which came slightly above market forecasts of 250K, and marked a moderate decline from the unrevised 315K print the prior month. This is the lowest reading since April 2021 and shows a decline from an average of 420K in the first eight months of 2022, and below the monthly average of 562K in 2021, showing that the current interest rates hiking cycle and higher prices have started to impact the economy.

The U.S. unemployment rate fell to 3.5% coming in below market expectations and the August print of 3.7%, which shows that the labor market remains tight, which could give room to the Fed to stick to its interest rate hikes projections.

Average hourly earnings for all employees on private nonfarm payrolls in the U.S. rose by 10 cents, to $32.46 in September 2022. This is a monthly growth of 0.3%, which came in line with market forecasts and remained unchanged from August. The yearly average hourly earnings decreased to 5% from 5.20% in August and are well behind the annual rate of inflation.

Investors are scratching their heads if the slowing economy would influence the Federal Reserve to abandon its interest rate hikes earlier, and at a lower terminal level, than what the central banks is currently predicting. Whether this number will have a significant impact on the Fed’s monetary decision in November is unclear, but September’s CPI data scheduled to be released on 13th of October 2022 should provide more clues. Last week Fed officials kept repeating that they remain committed to tame inflation which is at 40-year high, with more rate hikes, even at the cost of tipping the economy into a recession. Fed officials warned against betting on an early ‘pivot’ from the central bank and signalled last month that additional 125-basis point increase by year end is on the cards.

Job openings were released earlier in the week showing a decline in August amid a slowdown in overall demand. The number of job openings has dropped by almost 2 million from the peak of 11.9 million in March when the Fed’s first-rate hike in the current cycle took place. Equity market took a reprieve rally on hopes the Fed might take its foot off the accelerator; however, such hopes on an interest rate pivot appears to be premature, as job openings continue to be elevated.

The U.S. weekly jobless claims were slightly higher than expected, indicating some softness in the labor market. However, the data is still overall low and is unlikely to interfere with the Fed plans to continue its aggressive rate hikes. With labor market still tight and unemployment rates close to multi-decade lows, anxiety among investors is growing over the possibility that the Federal Reserve won’t change its hawkish stance, even as evidence the U.S. economy is cooling.

The S&P 500 index which gives a better representation of the broader U.S. economy traded sharply lower on Friday and we see a good probability of the decline extending further in the next few trading sessions. The daily stochastic indicator has turned down from overbought levels supporting our view that another short-term decline is underway. Once the current down swing is complete a mild rebound could be seen as the weekly momentum readings are in oversold territory. Overall, the price structure and the momentum conditions are in poor state and our medium-term view on the market remains bearish. We see levels to 3,400 in the coming month(s) as easily achievable.

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Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

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Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

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Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

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Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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