The weekender: labor market floats upstream—but the current’s getting choppy

Friday’s jobs data was the main course on a buffet of contradictions:
 

“Good Enough” Has Become the New Gold Standard.

Wall Street ended the week in a state of suspended disbelief, levitating above the fog of recessionary fears like a Houdini escape act in slow motion. Despite a gauntlet of gloomy forecasts from the usual suspects in the ivory towers of finance, the S&P 500 pulled off a Houdini close at 6000.35—not just a milestone, but a middle finger to every doom scroll call scribbled into sell-side research this year.

Friday’s jobs data was the main course on a buffet of contradictions: a Goldilocks headline of +139K, but with -95K in the past month’s downward revisions and a jaw-dropping 696K collapse in household employment. Like a soufflé that looks picture-perfect in the oven but collapses the moment you open the door, the labour market is flashing warning signs—just not the ones that stop this equity juggernaut.

Still, in the land of "who cares,” even softer narratives, “good enough” has become the new gold standard. The 10-year Treasury yield ripped higher, not because we’re barreling into a boom, but because we’re not crashing into a bust. Bond bears found just enough protein in the wage data to reload their ammo, pushing yields across the curve and flattening the 5s30s like a steamroller on a sugar high even as the market's brooding skeptic, the 30-year Treasury, joined the rate rebellion.

As for Trump, he wasted no time doing Trump things—demanding Powell slash rates by a full point. But markets called the bluff, slashing July rate cut odds to 16%, with just 1.8 cuts priced through year-end. The Fed’s hands are still tied in a poker game with inflation on one side and political crosswinds on the other.

Meanwhile, the VIX crumbled into a 16-handle, shedding its armour like a knight at a peace treaty. That’s what happens when payrolls don’t implode, the Musk-Trump tantrum fizzles, and China peace pipe signal dot the horizon. The whole thing smells more like a momentum melt-up than a fundamental revival. Yet the Magnificent 7 continue to float above the chaos, safe havens with swagger, led by a Tesla panic bid that pre-priced a Trump-Musk bromance call that never even happened.

Elsewhere, whispers about the US-China trade meeting gave the market a sugar rush. Licenses for rare earth exports? Negotiations on Monday? It’s déjà vu all over again—optics over substance, but in a market running on vibes, sometimes that’s all it takes.

Gold, the traditional truth serum of the macro world, gave back gains as yields climbed and the Trump-Xi détente deflated safe-haven demand. However, the yellow metal’s resilience remains, especially with the USD finishing at its weakest weekly close since July 2023—a reminder that the dollar’s structural woes (tariffs, debt, and scattershot White House musings ) are not going away quietly.

Oil, meanwhile, shrugged off everything and surged to a six-week high. A subtle nod to geopolitical tail risks, but also a signal that the market still believes in demand—at least enough to price in tightness rather than collapse.

Zooming out, this isn’t 2008. It’s not 2020 either. The current macro backdrop is a Frankenstein’s monster stitched together from exogenous policy shocks, endogenous political dysfunction, and data that's either lagging, revised, or just plain weird. The establishment survey keeps printing hope while the household survey flashes distress signals like a lifeboat flare in the night. The disconnect is growing too big to ignore, even if price action hasn’t caught on yet.

In short: we’re livin’ on the edge, with equities grinding higher on thinning ice, and bonds dancing to a beat no longer set by recession fears but by the absence of anything worse. It’s not bullish. It’s not bearish. It’s chaos with a bullish bias—a market that refuses to break as long as the cracks stay hidden just below the surface.

Welcome to the Teflon economy. Just don’t look down.

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Trump and Xi Reboot the Game—London Talks Signal Market Lifeline Amid Tariff Turbulence

In classic Trumpian style, what started as a scorched-earth tariff campaign now appears to be pivoting into a reset moment—this time on the cobblestones of London. The announcement of high-level US-China trade talks next Monday sent a jolt of cautious optimism through the market's veins, reinforcing the now-familiar cycle of tension, escalation, détente, and deal-making theatre that’s become a trademark of modern geopolitics.

Trump, fresh off a call with Xi Jinping, broke the news via his digital megaphone on Truth Social, revealing that Treasury Secretary Scott Bessent, Commerce’s Howard Lutnick, and USTR Jamieson Greer will sit down with their Chinese counterparts in London. It's a venue shift, but the script feels familiar—“constructive talks” with a side of nationalist bravado and the unmistakable scent of backroom deal grease.

Markets barely blinked—because they’ve seen this show before. The S&P 500 held onto its intraday gains, neither spiking nor selling off. That’s telling. Investors know that in Trump-era diplomacy, headlines drive flows, but the real play is in the follow-through, or lack thereof.

These London talks come just weeks after Trump’s “Liberation Day” tariffs lit a 145% fire under trade tensions. The Geneva ceasefire that followed saw both sides reluctantly step away from the brink, with Bessent brokering a temporary tariff rollback to calm a rattled bond market and stem hemorrhaging confidence across fragile global supply chains.

But don’t mistake the handshake for harmony. Behind the pleasantries, rare earths and advanced tech—particularly semiconductors—are the real battleground. These talks won’t resolve the strategic decoupling that’s been in motion since at least 2018. Instead, they’ll likely aim to re-sugarcoat the divorce proceedings, giving investors something—anything—to hang a risk-on trade upon.

What’s different this time is the political clock. Trump needs markets to remain stable, and Xi is navigating a sluggish post-COVID recovery alongside internal economic fractures. The incentive to find common ground—even temporarily—is high. And while London may lack the theatre of Mar-a-Lago, it may offer the quiet stage both sides need to reboot the optics.

Still, don’t expect a breakthrough. This is more likely a circuit breaker than a solution. But for now, that’s enough. For traders, no news would have been worse news. A scheduled meeting signals stability. And in a world where markets move on vibes, that’s bullish—at least for now.

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Stagflation Whispers Grow Louder as Q2 GDP Bump Looks Like Rearview Strength

Call it the mirage quarter. After a stronger-than-expected surge in Q2 real GDP—now tracking at 1.7% annualized versus 1.0% prior—thanks largely to a collapse in imports that padded the headline, it’s becoming increasingly clear that the runway ahead is narrowing fast. That backward-looking Q2 strength, driven by the momentum of March and April, feels more like a sugar high than a sustainable trend.

The forward outlook? A cocktail of stagflation that no investor ordered, but one the U.S. economy seems increasingly stuck sipping.

ISM Manufacturing and Services PMIs both slipped into contraction territory in May, flashing red on the real economy dashboard. At the same time, prices paid indexes are surging—classic stagflation fingerprints. This isn't just about growth slowing—it's about inflation persisting while momentum fades. The Fed’s worst-case combo is starting to show up in the macro.

Job market signals are decaying beneath the surface. While headline payrolls had something for everyone, the internals painted a far weaker picture. ADP’s net +37K private payrolls was a dud, and the household survey revealed sectoral losses in manufacturing, temp help, retail, and government. Initial claims are rising above the 12-month average, while continuing claims remain stubbornly high—more proof the labor market isn’t just cooling, it’s quietly cracking.

Add to that a spike in the Global Supply Chain Pressure Index, hitting the highest levels since August 2024, and the narrative shifts from “soft landing” to tight squeeze. This isn’t just noise—it’s a constraint on corporate margins and consumer flexibility, and a ticking time bomb for policymakers who remain cornered between too-tight and not-tight-enough.

So yes, 2025 full-year GDP was revised up to 1.5% from 1.3%, with Q4/Q4 growth now at 1.0%—but that’s the kind of revision that looks better in a chart than it feels on the ground. Beneath that surface-level cheer is a market running on borrowed time, and a Fed increasingly boxed in by the worst of both worlds.

In trader speak: don’t trust the tape. This isn’t strength—it’s the lag effect of old momentum meeting a wall of new headwinds.

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Chart Of The Week

Again, I have two charts for you this week, both related to tariffs. But courtesy of Reuters, not Goldman, this week.

 

 

The first chart illustrates the extent of tariff-related turmoil the S&P 500 has navigated since President Trump took office. In many ways, it's remarkable that the index is up for the year.

 

 

The second is based on a New York Fed survey published this week, which shows how U.S. firms are passing on price increases to their customers. Most strikingly, almost half of the services companies are passing on 100% of the tariffs.

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Running Update

It was a decent running week, even if I didn’t feel remarkably spry—almost like I was brushing up against a bug that never quite landed. But I’ve strung together a solid set of runs, capped off by a strong session this morning that felt like it could’ve easily gone another hour. Oddly, Garmin's algorithm is flashing a massive drop in my endurance, but that feels disconnected from how my body’s actually responding—I’m feeling great this weekend.

That disconnect has prompted me to rethink my plan. Initially, I committed to a strict 12-week, 100% Zone 2 block, and I’m now three weeks in. But I’m toying with stretching that out to 36 weeks—carrying it all the way through December as a full-system reboot. I’d still incorporate a monthly 10 km run at a pace to maintain some sharpness, but the core would be pure Zone 2.

At the end of the day, I’m reconnecting with the original reason I started running again. It was never about chasing marathon medals—it was about health, balance, and well-being. A 36-week Zone 2 foundation feels like the ultimate way to honour that. Strip it back to basics, build from the ground up again, and let the body recalibrate fully.