Five for Friday

Layoffs, International Stocks, Bearishness, Attention, Coinage

1. Labor

From DOGE-led cost-cutting in the federal government to actions by high profile firms like Southwest, layoffs have been in the news. Although losing a job is devastating on an individual level, media coverage tends to highlight layoffs without giving as much airtime to broader hiring plans and the size of the labor force, which are important to understanding the economic picture. For context, roughly 164 million people in the U.S. are employed today (mostly by small businesses), so a layoff of 1,000 people, for example, would be just 0.0006% of the labor force. The U.S. economy has added jobs each month since the end of 2020 (a total of 16.5 million jobs) while initial claims for unemployment insurance remain historically low. There are also north of 7.5 million job openings in the U.S. In today’s attention economy, “if it bleeds, it leads” is being stretched to its limit, but raw data demands context. Just ask Mark Twain.

2. Going global

Last week, the Euro STOXX 50—a widely-followed index of blue-chip eurozone stocks—hit its first new all-time price high in roughly 25 years, nearly one year after Japan’s major stock index hit its first all-time high in 34 years. International stocks have performed better than expected for months now—worth noting considering the tariff and geopolitical backdrop. Many U.S. investors have now finally thrown in the towel on international diversification, but it hasn’t been that long since it’s been useful. International diversification would have benefited U.S. investors across the 2000s, when international excluding the U.S. returned 36% while the S&P 500 returned -9%. If a deglobalizing and multipolar world decreases the correlation of global stock indices and weakens the U.S. dollar, international diversification could make a comeback.

3. Sentiment

A famous Wall Street maxim asserts that bull markets climb a wall of worry. Another postulates that bull markets are born on pessimism and grow on skepticism. Sentiment has tended to act as a contrarian indicator for markets, and worrywarts are having a resurgence after post-election market enthusiasm and AI mania suggested to many that we were entering the later stages of a bull market (the “die on euphoria” phase in the contrarian framework). Per the American Association of Individual Investor’s weekly survey, over 47% of respondents were bearish on the stock market’s near-term prospects (vs. 28% bullish)—the highest level of near-term bearishness since 2023 and well above long-term averages. Today’s noise and uncertainty may be the footholds the market needs to keep climbing that wall of worry—but investors must stay in the game to reap the potential rewards.

4. Attention

I recently wrote about how the attention economy does a disservice to long-term investors by stoking emotional responses to negative headlines. Financial services firm Dalbar quantifies this risk by noting that for the 30 years ending in 2022, the average equity investor earned 6.8% annually vs. a 9.7% return for the S&P 500 (for total returns of 622% vs. 1,486%; our chart shows this effect on an initial $10,000 investment). Dalbar puts it bluntly: “Emotional decisions hurt returns. Investors tend to sell out of investments during downturns and miss out on rebounds.” (Dalbar analyzes purchases and sales across thousands of mutual funds to create an aggregate profile of the average equity investor’s behavior).

5. On this day

In 1782, authorization was granted for the first U.S. mint. Financier Robert Morris oversaw the effort, which included striking the first coin under U.S. authority – the Nova Constellatio. While the original mint was replaced by Congress in 1792, Morris’s pitch to use decimal accounting for the nation’s money (the first of its kind in Western Europe or the Americas) would inspire Thomas Jefferson’s vision for the monetary system ultimately adopted by the U.S.

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This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Market and economic statistics, unless otherwise cited, are from data provider FactSet.

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