Did you know that Initial Jobless Claims are considered one of the most reliable real-time indicators of economic health?

That is why keeping an eye on jobless claims can provide early warnings of economic shifts, even when revisions are made.

Here’s what we have for you today:

• Small Cap Outperformance Not Likely To Last: First, despite recent gains, small caps are unlikely to continue outperforming large-cap stocks ❌

• Payrolls Revised Down By 818k: Next, the labor market remains robust despite a significant downward revision in job creation numbers 📊

• The Economy Still Looks Strong: Finally, contrary to widespread pessimism, the latest data indicates that the U.S. economy is growing at a steady pace 💪

Stay tuned as we explore these topics and what they mean for your investment strategies in the current market environment. Have an awesome weekend!

Small Cap Outperformance Not Likely To Last ❌

Notwithstanding small-caps’ resurgence in July, it’s doubtful that they are entering a sustained period of beating the large-caps.

New research has found that the so-called small-cap effect—the supposed tendency for small-caps to outperform large-caps over the long term—was likely a statistical error, and in fact it never really existed in the first place.

The truth is that over the long run, small caps consistently underperform the broader market 📉

Payrolls Revised Down By 818k 📊

The media is paying considerable attention to the downward revision in the number of jobs that were created between April 2023 and March 2024.

Initially the number of jobs created over the period was thought to be 2.9mn, but it was revised down to a little over 2mn.

Economists and investors who follow this data have known that there would be a downward revision since at least March 2024, so there is not really anything new here, just confirmation of what we already knew 🤷

The labor market remains healthy and the data will not alter the Fed’s plans to cut interest rates in September, probably by 25bps.

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The Economy Still Looks Strong 💪

Despite all the pessimism, the fact is the latest economic data points to an economy that is still growing at a solid pace.

Most importantly, Initial Jobless Claims, which are released every Thursday morning, show a jobs market that still looks healthy.

Additionally, retail sales reveal that the pace of private consumption remains strong.

The US economy is on pace to grow by a healthy 2%, according to the Atlanta Fed’s real time GDP tracker 📈

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