State Street Global Markets Senior Multi-Asset Strategist Marija Veitmane joins Yahoo Finance Live to discuss the ADP jobs report, inflation, and how broader macroeconomic headwinds are weighing on markets.
AKIKO FUJITA: Joining us with more on all this is Marija Veitmane, she's State Street Global Markets' senior multiasset strategist. Good to talk to you today. Walk me through this big reversal that we have seen. We started Q4 off with a big bang, and here we are today talking about a big selloff.
MARIJA VEITMANE: Yeah, hi. I mean, for us, the kind of big rally we saw earlier in the week was, I mean, a bit unexpected. We still have a fairly bearish outlook on the market. So it could have been potentially a little bit overexaggerated reaction to some concerns-- for first signs of concerns about labor market.
But I think it's important to kind of realize that we came to this-- to the data release in JOLTS number in a very oversold position and risk assets, right? So stocks been selling fairly consistently for good six weeks. Dollar is close to all-time highs. We have a-- well, we're in a kind of difficult position in most markets. So market was kind of very short risk. You have a number that suggesting that labor market is potentially weakening, could change Fed expectation, and boom you have this huge reaction.
But I mean, on a kind of hindsight what we see, is that actually US economy may be showing kind of first signs of labor market weakening. But there are a lot more to it. And kind of our overall kind of bearish tone comes from consumers still have money to spend. Labor market, we don't know whether it's that weak after all. I mean, you're putting chart of participation rate.
We know that people haven't come back to work to pre-COVID level. So money is still there. So inflation problem is not solved. So difficult to get very bullish in this market.
AKIKO FUJITA: Yeah, that is a long list of things that you just rattle off, in terms of concerns weighing on investors right now. We've obviously got that big jobs number coming out on Friday. What's your expectation there? And what are we likely to see from the market if, in fact, it comes in a little weaker than expected.
MARIJA VEITMANE: No, I think you're exactly right. So kind of risk reward is very, very asymmetric. So markets really latched on to the first JOLTS number, which is, I mean, not a primer number in terms of economic numbers in general. But market was very, very encouraged and hopeful that we have seen some weakness from what Federal has already done, and they don't need to be very, very aggressive. So should that be confirmed by weak payroll number, I think the reaction would be really, really huge.
Well, if we see-- I mean, we're probably not in a camp expecting a lot of weakness. And should that come then, we kind of continue to going down. But definitely outsized reaction on weaker payroll numbers.
AKIKO FUJITA: We've said, that you know, we're looking ahead to the November meeting for the Fed. In the meantime, we've got earnings season really kicking off into high gear. How much of that is going to be the driver moving forward, at least in the short term?
MARIJA VEITMANE: I mean, that was really interesting so far this year, because earnings almost didn't matter. So what was driving equity markets is really those macroeconomic headwinds and compression and multiples, while earnings stayed-- I mean, not great but still positive. So companies were producing profits. So up to now, earnings didn't matter.
We probably expect something similar. We still expect corporate earnings to be somewhat OK, not great. So trailing earnings, exceed reporting numbers.
Guidance will probably be weakish as we worry a lot about we incorp-- and management worry about a lot about tighter financial conditions so guidance will probably be weak. But it's really about policy. So I would probably still say that, yes, earnings season is important, but macro headwinds dominate.
AKIKO FUJITA: OK Marija Veitmane setting us up for a very busy week ahead. State Street Global Markets' strategist-- Markets' senior multiasset strategist, good to talk to you today.
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