Lots of activity this week to drive equity market capitalizations. Volatility spiked, gas prices also spiked, and the market plummeted. Actually, the Fab Five remained relatively stable and the Telco Top Five actually rose this week. No doubt there are anxieties, and each stock in the Fab Five is meaningfully (>10%) off from their all time high, but here is the 5-year return for the Fab Five (by stock, with dividends reinvested, through Friday’s close):
Note that this includes 2022 which is a year most in tech would prefer to forget. When the worst stock in the Fab Five is earning 16% annual returns, it’s hard to bemoan recent events. News events will come and go, but cash flow continues to be very steady.
We are particularly surprised at the craziness surrounding Microsoft. While not the best positioned, they are the most balanced between consumer and business spending. They field a very disciplined management team, and support significant innovation across (quantum) computing, AI, and other innovations. Perhaps last week’s $120 billion gain is a sign that the market is starting to see the light.
On the macroeconomic front, we had the jobs report on Friday. It was disappointing relative to expectations, but fits into the “you reap what you sow” category. Since the Trump administration began their aggressive movement against illegal immigration, civilan employment of nonresidents has dropped. See this chart from Friday’s release:
The foreign born noninstitutional population decreased by 741K and the labor force by 530K. Is it any surprise, that the foreign born employment base correspondingly decreased by 519K? (Note – overall employment decreased by 426K meaning that there was a small offset from increased native born employment). When you encourage workers to leave your country, they are not going to be counted as employed. And the transition to native born hiring/ employment is not instantaneous.
The principal reason for this month’s increase in unemployment is not because foreign born workers are being laid off (unemployed workers for this group fell). It’s growth in the native born workforce (entirely women) that drove up the number of unemployed workers by 93K over the last 12 months. The sources for this change are not entirely clear, but the “things are bad all over” theme is also not true.
More commentary in an April Brief once we have state-level data (January data now slated for an April 8th release), but annual changes show that with record retirements taking place, we need to be prepared for a large series of adjustments:
- More retirements (and changes in who is hired to replace)
- More temporary unemployment (DOGE, AI, less white collar and more blue collar)
- More moves to where jobs are abundant
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