This morning we received two of the latest updates on labor market demand with the release of the August JOLTS report in addition to postings data from Indeed through the end of September.  The JOLTS report came in well above expectations (9.61 million versus 8.83 expected) indicating a solid rebound in labor market demand headed out of the summer.  In spite of that positive reading, the overall trend of lower openings remains in place and is echoed by Indeed’s data.  As shown below, the more timely and higher frequency postings data has also been trending lower since the end of 2021. That being said, the summer has seen those declines decelerating with postings only slightly lower over the past three months. Modeling the JOLTS number on the less lagged Indeed data would predict that postings would remain around these levels next month. In tonight’s Closer, we will provide a full rundown of the latest JOLTS report.

In addition to national reads on job postings, the Indeed data also provides geographic breakdowns by US metro, and in the table below, we highlight the 25 MSAs (metropolitan statistical area) that have seen the best and worst postings growth relative to pre-pandemic baselines as well as how far they have fallen from their respective peaks (we highlight when each of those peaks were as well). Many of those with the highest number of openings relative to pre-pandemic are also those with smaller populations.  Conversely, many of the largest metros have seen job postings fall off the most. There have also been a growing number of cities where postings are now below pre-pandemic levels.  San Francisco is the worst of these with postings down nearly 20% from baseline.

After a relatively dismal two months for stocks, the market kicked off what has historically been its strongest period of the year today.  In the post-WWII period, the S&P 500’s average performance in Q4 has been a gain of 4.1%, which is more than double the 2.0% average gains of Q1 and Q2 and ten times the average gain of Q3 (0.4%).

While Q4 has been positive for equities, the month of October has historically been volatile. Since 1945, the spread between the month’s daily closing high and closing low has been 7.1%. While the average spread for every month except October fits within a 1.3 percentage point range of 4.7% to 6.0%, October is all alone at more than a full percentage point from the high end of that range.

With Q4 being the strongest quarter of the year and October being the most volatile month, they don’t call October the month of market bottoms for nothing.  In looking back at every market decline of at least 5% (without a rally of 5%+ in between), market lows have easily been the most prevalent in October.  As shown in the chart below, 33 (14.4%) of the ‘market lows’ since 1945 have occurred in October, and the only two other months that account for even 10% of all market lows were March and September.  Seasonality is on the side of bulls heading into Q4, but that doesn’t mean the road is smoothly paved.

Please click the image below to view our October 2023 market calendar.  This calendar includes the S&P 500’s historical average percentage change and average intraday chart pattern for each trading day during the upcoming month.  It also includes market holidays and options expiration dates plus the dates of key economic indicator releases.  Click here to view Bespoke’s premium membership options.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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On This Day in History:

Thrilla in Manila. On October 1, 1975, Muhammad Ali and Joe Frazier settled the score in their third and final boxing match.  The battle took place in Quezon City, Philippines, and the two heavyweights came together to create what is still widely regarded as one of the greatest boxing matches of all time. Leading up to the fight, there was plenty of trash-talking between the two greats.  Frazier described the rivalry between the two by describing it as “real hatred. I want to hurt him. I don’t want to knock him out. I want to take his heart out.”  Ali, meanwhile, who was always known for his more colorful talk predicted that “It will be a killa and a chilla and a thrilla when I get the gorilla in Manila.”

Having one victory apiece between each other going into the fight, the “Thrilla in Manila” went a murderous 14 rounds before Frazier’s corner stopped the fight as his cornerman Eddie Futch told the fighter “Sit down son, it’s all over. No one will ever forget what you did here today.” Ali won by TKO, and his own cornerman Angelo Dundee described it as “the toughest fight I’ve seen in my life.  Ali, even gave Frazier a half-hearted pat on the back by saying that Frazier “could have whupped any fighter in the world, except me. He is great – greater than I thought. He is one hell of a fighter and it was one hell of a fight.”

Given its waning popularity in mainstream sports, it’s highly unlikely that we’ll ever see a rivalry quite like Frazier-Ali again in our lives.  It was one of the biggest entertainment events in sports history, but more importantly, it epitomized the impact of sports and the competitive rivalry between two all-time greats. 

Technology and Natural Disasters

The High-Tech Drones Tracking the World’s Most Dangerous Storms (WSJ)
NOAA (National Oceanic and Atmospheric Administration) is using hurricane tracking drones, some that work under the ocean’s surface, some that sail, and newer models that fly, in order to gain information about the paths and intensity of severe storms. The technology also uses satellite imagery and other measurements like water and atmospheric temperatures, and the drones are capable of withstanding the harsh conditions of the air and water that accompany these storms. The WSJ details the story in an interesting video here. [Link]

AI predicts how many earthquake aftershocks will strike — and their strength (Nature)
Three new studies have explored the use of deep-learning models to improve earthquake forecasts, with promising results. These models outperformed conventional models in assessing the risk of aftershocks following significant earthquakes. While these findings are preliminary, they represent a step forward in leveraging machine learning for seismic risk reduction. Agencies such as the US Geological Survey may consider integrating machine-learning models into their earthquake forecasting. [Link]

Environment

This is what Earth’s continents will look like in 250 million years (Nature)
Researchers predict that most of Earth could become uninhabitable for humans and other mammals in 250 million years due to the formation of a supercontinent. The forming of the supercontinent, Pangaea Ultima, is expected to drive volcanism and increase CO2 levels, leading to extreme temperatures and desertification. Increased solar radiation from the aging sun will exacerbate the heating too. Just about 8% of the Earth’s surface, mainly coastal and polar regions, would be suitable for human life, possibly leading to a mass extinction event. Do you really want to live forever now? [Link]

Japanese scientists find microplastics are present in clouds (Al Jazeera)
Researchers have found microplastics in clouds on Mount Fuji and Mount Oyama, confirming their presence in the atmosphere. When these microplastics reach the upper atmosphere and are exposed to sunlight, they degrade and contribute to greenhouse gas emissions. The impact of microplastics on climate and ecosystems is not fully understood, but their presence in clouds, after already being discovered inside fish, Arctic sea ice, and in snow, raises concerns about their potential effects on weather patterns and climate change. Some evidence even links microplastics to heart and lung health problems, as well as cancer. [Link]

Business

A Silver Lining From the Pandemic: A Surge in Start-Ups (NYT)
Research suggests that the Covid-19 pandemic led to a surge in Americans starting their own businesses. The pandemic caused a shift in how many Americans live and work, opening doors for entrepreneurs to respond to new business opportunities, often with the help of federal government pandemic assistance. Monthly applications for new businesses that create jobs have increased significantly since 2019, and young companies now account for a larger share of employment and total firms in the economy. It’s even possible that this surge may have contributed to labor shortages experienced by existing businesses in recent years. [Link]

Linda Yaccarino Defends Elon Musk in Tense Interview About Twitter’s Transformation Into X (The Hollywood Reporter)
Linda Yaccarino, CEO of X, defended the company’s stance on free expression and freedom of speech while responding to criticism from former Twitter executive Yoel Roth, who accused the platform of not doing enough to combat harassment. She emphasized that X is a new company and stated that Twitter was operating under different philosophies, which she argues bordered on censorship. She also addressed Elon Musk’s recent announcement about potentially charging users for the platform, without giving a clear stance on the issue. [Link]

Target says it will close nine stores in major cities, citing violence and theft (CNBC)
Target is closing nine stores across the US, as theft, violence, and organized retail crime trends higher in the country. The company mentioned that the safety of its team and guests, as well as business performance, were being threatened. In its most recent earnings report, the company noted higher levels of shrink due to the crime, and the decision to close stores is explicitly blamed on the ongoing retail crime. Target, among many businesses and people around the country, continues to advocate for legislation on the growing issue. [Link]

The World Needs New Antibiotics. The Problem Is, No One Can Make Them Profitably. (WSJ)
Broken business models are affecting the development of new antibiotics to combat superbugs. Six startups that gained FDA approval for new antibiotics since 2017 have all filed for bankruptcy, been acquired, or shut down. The traditional pharmaceutical model, which relies on selling high-priced treatments to recover development costs and reward investors, doesn’t work for antibiotics. New antibiotics are intended for rare and brief use, making them unsuitable for high pricing. The profitability issue continues to deter large pharmaceutical companies despite calls to support antibiotics like rare disease treatments that receive subsidies and tax breaks. [Link]

Markets and Investments

Costco is selling gold bars and they are selling out within a few hours (CNBC)
Costco is selling 1-ounce gold bars to its members, which are reportedly in high demand. They’re only available online to Costco members and are limited to two per customer, selling out within hours of being posted on most occasions. The offering by Costco has coincided with increased demand for dried foods and other survivalist goods which tend to sell well during periods of heightened uncertainty. It’s a clever way to appeal to a certain segment of its customer base, particularly those concerned about financial stability and looking for safe-haven assets like gold. You can read more about Costco on our Conference Call Recap published this past week. [Link]

Wall Street’s Need for Speed in Stocks Is Reshaping the FX World (Bloomberg)
Changes to the way US equity trades are settled are causing ripple effects in the global foreign exchange market. The US is planning to reduce the time it takes to settle equity transactions to just one day, while in the world of foreign exchange, trades typically take two days to complete. This means many foreign institutions buying American assets will need to secure dollars in advance for settlement, potentially causing operational and liquidity challenges. As a result, financial firms are considering shifting jobs and extending trading hours to accommodate these changes. [Link]

Panda Politics

US Won’t Have Any Pandas for the First Time in 50 Years (MSN)
The giant pandas at Washington, DC’s National Zoo, which have been there for over 50 years, will return to China by December. The DC pandas will join the rest of the pandas in zoos across the US in a return to China by the end of the year, leaving no more pandas in the country. This comes amid strained US-China relations, but both sides deny political undertones played any role despite China’s use of “Panda Diplomacy” to build diplomatic relationships in the past. The pandas have been on loan from China, and the move may be temporary or could be revisited in future diplomatic negotiations. [Link]

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Have a great weekend!