Last week, I stunned the world by claiming that NFP (the nonfarm payrolls component of the big jobs report) "didn't matter." OK, maybe not the whole world, and maybe people weren't completely stunned, but in the long-term market following context, such claims are risky business.
I'll admit, I was tempted to second guess myself when the number crushed expectations and bond yields spiked quickly, but I doubled down in that morning's analysis, essentially saying this too would pass. Simply put, while historically massive market movers will always command some short-term volatility potential, their lasting impact is limited in this particular market environment.
The first reason for that--these days anyway--is the trade war. While some pundits may claim that the parts of the economy affected by trade are not going to cripple the economy if they slump, those pundits are largely insane or simply lying. Rest assured if tariffs are implemented as scheduled and no trade deal is ever hammered out between the US and China, there is a 100% guarantee of recession within 18 months and probably within 9 months. Markets are absolutely counting on at least some form of progress, but there's a wide spectrum of beliefs as to what that progress will look like.
In short, the final details of that "progress" will have a major say in the shape of the economy in 2019. As such, traders are justifiably not too hung up about present day cues in sectors that have been fairly consistently strong (such as jobs counts).
It's a similar story with the Fed today. Their message has been fairly consistent. The last 3 rate cuts were the only 3 they're planning on for now. They too will join global markets in waiting to see how things shake out with trade negotiations and the resulting economic data. Until the economy pushes them in one direction or the other, they're done moving rates. We'll hear them confirm that today and everyone knows it. Bottom line: the Fed doesn't matter both because we know what they're going to say and because the trade war matters more. The caveat, as NFP reminded us, is that historically important events can certainly still have a short-term impact on bonds!