Interactive Brokers’ Jose Torres draws on many tools to assess the economy, the Federal Reserve’s policy path, and who is ahead in the race the White House just days before Election Day.
When it comes to the October jobs data he puts on his senior economist hat and says when it comes to seeing the message this strike and hurricane battered report and basically says, Throw it out!
”We can essentially just forget too many headwinds, too many disruptions. When you consider the storms. When you consider the Boeing strike rather just way, too much turbulence. Look at what happened on Wednesday, Kathleen, with the ADP (jobs) report. It was ridiculously strong. And now we get a report 2 days later that is the total opposite.
“Sandwiched in between we got unemployment claims which were pretty, you know, noisy on a week to week basis, but pretty well behaved yesterday morning. So I think job market is doing fine corporate balance sheets are strong. Companies don't have an incentive to get rid of workers in mass, right?
”There's political uncertainty on the horizon. There's economic uncertainty on the horizon. But the economic uncertainty…is to the upside companies don't want to start trimming labor.”
Another tool he uses to assess the conditions driving the economy, inflation and the Fed is his constant contact with traders and investors.
Condition in financial markets “are absolutely loose…When you talk to the trading community…(they say) we have a speculative mania going on out there, and, to quote the former chairman of the Federal Reserve, Paul Volcker, he used to say…that speculative manias were the cousin of inflationary pressures.”
”So when something I look at really closely is price to earnings, multiples valuations…especially as they relate to interest rates, bond yields, and when I look at those figures we can extract the risk premium. Are you getting paid to take on this risk? In my opinion absolutely not. But there's so much liquidity in the system, Kathleen, that everyone wants to put their money in stocks because they really don't know where else to put it.”
As for what the Fed will do next week with its key rate, Jose is also expecting a 25bps cut as not because he necessarily thinks it is needed given the strength he sees in the economy but because many officials have signaled that’s the path they are heading down and he does not expect the latest jobs report to stop them.
How about vetting the latest surveys and reports on whose ahead in the race to the White House? Jose pulls out Interactive Brokers’ new Forecast Trader which shows that odds of Kamala Harris winning the White House are up from a recent low of 35% at the beginning of the week to new highs of 46% now as the week ends, while Trump maintaining this lead at 55%.
So dive in for a look and a listen. Jose has many tools. Hear more from him about what they are and where they are taking him — and you - now.
José Torres is Senior Economist at Interactive Brokers. In this capacity, he is responsible for economic analysis, economic commentary and educational content focused on the economy. Prior to joining Interactive Brokers, José spent 6 years working as an economist in the United States government within the Federal Deposit Insurance Corporation (FDIC) and the Bureau of Labor Statistics (BLS). During his time with the U.S. government, José frequently led presentations covering economic conditions and forecasts for elected officials, political appointees and senior management. He also built economic models, consulted with private sector executives, contributed to the modernization of economic processes and gained recognition for predicting the inflationary episode of the 2020s. José has also been a professor of economics at the City University of New York and holds a master’s degree in financial economics from West Texas A&M University.
Torres Says Forget Jobs Report: Broader Data Show Labor Market "Doing Fine"