This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron's.

2 Jobs Numbers That Matter

Economic Update Regions Financial Oct. 2: While many are focusing on the headline metrics-nonfarm job growth, average hourly earnings, the unemployment rate-and assessing what they are saying about the labor market or the broader economy or what they might mean for the FOMC, we'll offer two numbers-53.1% and 60,167-that we think speak volumes.

First, the initial collection rate for the September establishment survey was a ridiculously low 53.1%, which right off the bat renders the initial September estimates of nonfarm employment, hours, and earnings highly suspect.

Second, and more importantly, at least if you set aside the low September collection rate, over the 12 months ended in September, the not seasonally adjusted data show private sector payrolls increased by an average of 60,167 jobs per month, or right in line with the trend rate that has prevailed since early 2025. This is, to us, the most relevant data point we can pull from the September employment report; while the estimates of monthly job growth on a seasonally adjusted basis have been all over the map, the underlying trend rate of job growth in the not seasonally adjusted data has been notably stable.

Moreover, though well lower than what we were all accustomed to over the years prior to the pandemic, the current trend rate of job growth is more than adequate to hold the unemployment rate in check, given what is, month to month swings notwithstanding, much weaker labor supply growth. This has been, and remains, our focus.

Richard F. Moody

Election Cycles and Stocks

Sadoff Team Commentary Wealth Enhancement Advisory Services Oct. 1: The four-year presidential cycle has historically been a useful guide for understanding market trends. Since World War II, the pre-election year (2027) has been the strongest of the four years, on average. In fact, the S&P 500, including dividends, hasn't experienced a negative pre-election year since the 1930s. Many market historians attribute this strength to policymakers' tendency to support economic growth heading into an election year through fiscal and monetary policies that encourage favorable economic conditions.

This year, the midterm election year, has historically been more volatile. It is often associated with larger-than-average market corrections that tend to reach their lows during the September to October time frame. While these periods can be uncomfortable for investors, history suggests they have often created attractive opportunities. Since 1950, the 12 months following a midterm election have produced an average return of 16.6% for the S&P 500, with no negative 12-month periods following the election.

While market volatility often creates uncertainty during midterm election years, history suggests that some of the best gains may lie ahead. When the four-year presidential cycle is analyzed quarter by quarter, the next three quarters emerge as the strongest period of the cycle. On average, the S&P 500 has gained 20.2% during the nine months from Oct. 1 of the midterm election year through June 30 of the following pre-election year.

Bryan, Michael, and Ronald Sadoff

Capex Spending Doom

CoreMacro Strategy Report BCA Research Oct. 1: Capital spending booms rarely end well for investors. Investing vast sums quickly tends to produce a major decline in returns on capital. And share prices of companies undertaking massive capital expenditure often peak well before their investment outlays do.

Data centers being commissioned today will likely become outdated (and uncompetitive) within a few years as technology improves and low-marginal-cost competitors emerge. This would push hyperscalers' return on equity far below what their current valuations imply.

Given the steep cost of data-center buildouts and technology, providers of compute today are unlikely to hit their profitability targets. Demand for compute is contingent on token prices. If token prices plummet, demand for compute would rise substantially, but eat into model providers' revenue. However, if token prices don't drop considerably, demand for compute would be underwhelming....

For the AI trade, the canary in the coal mine will be the companies investing heavily in data centers. If their stock prices drop or corporate spreads widen materially, they will face pressure to cut back projected investment. This will weigh on the share prices of their suppliers (semiconductor producers, industrial companies, etc.).

Expectations for U.S. profit growth and AI spending are unrealistic and will correct sooner than most anticipate.

Arthur Budaghyan

Credit Spreads' Message

Sevens Report Kinsale Trading Sept. 30: Credit spreads are the difference in yields between two bonds with the same (or similar) maturities but different credit qualities-for instance, the difference between the yield on a 10-year Treasury and the yield on a 10-year corporate bond, or an index of corporate bonds with a maturity around 10 years. When credit spreads widen, especially in times of low rates, it means the bond market could be pricing in a greater chance of an economic slowdown. However, in times of elevated yields, credit spreads can tell us if bond markets are getting concerned about corporate profits.

We should become more worried about this bull market if the rise in Treasury yields is accompanied by a widening of credit spreads. Positively, that isn't happening now. We watch the Moody's Baa/10-year Treasury yield credit spread, which compares the yield on 10-year debt between the higher end of the "junk" bond complex to the 10-year Treasury yield. Anything above 2.0% is a warning shot, and above that is a potential problem. However, since Aug. 14, around when the 10-year yield really began to accelerate, credit spreads have declined sharply. and recently hit a one-year low of 1.39%. That tells us the rise in Treasury yields isn't being accompanied by increased concern for economic growth or corporate health, and that's a good thing.

Tom Essaye

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