The news has been blown up as positive, but in reality, it's just giving ammunition to the bears—these next few sentences are straightforward, and once you hear them, you'll understand why we should continue to be bearish.
1. Good numbers ≠ truly stable employment.
In the latest week, initial unemployment claims were 223,000, matching expectations, and the media immediately shouted, 'The labor market is resilient.' But don't forget:
◦ The previous value was 219,000, which actually shows an increase month-on-month.
◦ More critically, the 'number of people continuously receiving unemployment benefits' has quietly risen to 1.9 million, with the four-week average also reaching a new high since the end of 2021.
In simple terms, the number of new layoffs hasn't exploded, but the people who were laid off before still haven't found jobs, and that's the underlying current.
2. Unemployment benefits themselves = the government's 'delay tactics.'
The new version that has just been released increases unemployment benefits and extends them to 73 weeks. It sounds like money is being given away to stimulate the economy, but in reality, it means:
◦ The government fears that a wave of unemployment will immediately impact votes, so they first distribute money to stabilize the situation;
◦ Companies see people getting money to get by and are not in a hurry to hire, leading to continued shrinkage in job vacancies;
◦ More people receiving money means soaring fiscal deficits, leading to either tax increases or bond issuance, both of which are negative for corporate earnings.
3. Tariffs + high interest rates = the second wave of layoffs is already on the way.
Yale's budget lab recently calculated: If Trump's secondary tariffs are implemented, they could directly reduce U.S. GDP by 0.5% by 2025 and raise the unemployment rate by 0.3-0.7 percentage points.
The Federal Reserve is currently sticking to its guns and not cutting interest rates, which keeps corporate financing costs high; import costs have also been raised by tariffs, squeezing from both ends, and the next step is the familiar script of 'profit decline - layoffs and cost-cutting.'
4. The market is getting excited early = giving us a better shorting opportunity.
Once the unemployment data was released, the dollar plunged, gold surged, and the Nasdaq initially rose before falling—a typical 'good news sell-off' pattern. Smart money raised prices based on the news and then handed off the chips to retail investors chasing the highs.
Historical pattern: As long as unemployment benefits start to remain consistently above expectations, the stock market often has a 5-10% 'lagging downturn potential.' This time will be no exception.
In summary: The prettier the unemployment numbers, the more it shows the government's insecurity in providing a safety net; the real wave of layoffs is still to come, and bears don't need to rush—just wait for the waterfall to come crashing down!
