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We're going to take a deeper dive into the market's reaction to this job openings data. We've got Mike Reynolds. He is the vice president of Investment strategy over at Glenn Meade. Mike, great to have you here with us this morning. Let's just get your reaction here to what you're seeing in Jolton, even though it is one of the more lagging indicators, especially in the economic data that's coming out over the course of this week in the employment market here. What are you kind of taking away from this broader trend that's starting to get locked in?

Yeah, thanks for having me on this morning. There's this ongoing debate right now, whether what we're seeing in the labor market is signs of deterioration or normalization. We have to remember we're coming off of one of the most tight labor markets we've seen in the post-COVID era, where there were a lot of dislocations, businesses had a hard time finding employees. If you look at a time series of job openings now, we're looking pretty close to where we were pre-pandemic. We're coming out on the side here that this is more like normalization. We're really not seeing the bottom fall out of the labor market yet. Uh we've looked at things like jobless claims, which are continuing to hold in uh pretty nicely and have actually refuted some of the more pessimistic takeaways from the some roll tripping last month. So we're we're looking at this is just another sign of normalization, but you sort of have to look at this critically as well that you don't want normalization to turn into deterioration where you're getting into this self-propelled feedback loop where the labor market starts to just get worse and worse. So we're watching it pretty closely, but for now, things on the whole still look relatively healthy.

Mike, what are you going to look at to indicate that we are not slowing but slow for this labor market? particularly when you look at a data point like the jolts numbers we got today. There's a lot of individual data points under the hood that you can pull out, right? layoffs, firings, the quit rates, separations, for example, under the hood, what data point will you look at to determine the path forward for this labor market?

It's really important to stay focused on the leading indicators. From our perspective, one of the best leading indicators is initial jobless claims. We get it every week and it tends to be a decent sign of where the labor market is heading, not necessarily where it sits currently. And we're still getting sort of mid 200k prints, which is really healthy and an ongoing expansion. We would start to get worried if we start to see that move up around the 300 range or perhaps even higher, as again, that tends to lead unemployment rate and it tends to, you know, lead more general indicators of where the the employment situation is heading.

Early August, uh economic data sent the markets tumbling. Early September, uh economic data that we're getting out, we saw a massive slippage yesterday, here today. It looks like markets are trying to rebound here a little bit. What is your estimation of how much the early September economic data will insert even more volatility on top of the seasonality that we come to expect at this juncture known as the September effect?

Yeah, to start this month, we've seen sort of two flavors of disappointment. You got it from the manufacturing PMIs where the headline actually looked okay, but the internals, looking at new orders going down, inventories going up, starting to sort of give a little bit of pause on the health of the manufacturing side of the economy. Um there is some concern there that that's the data point the Fed might not actually react to, especially since the employment portion of the PMI was actually one of the bright spots. The Fed is really focused on employment right now. Um another side of that disappointment coin has been the AI trade, and we saw Nvidia, one of the the larger decliners and contributors to that downturn yesterday. And this is really just lining up with the classic disappointment around hype cycles. We've seen it around the tech bubble where valuations get lofty, try to sort of price in some really lofty earnings expectations going forward, and ultimately a disappointment in that. And we think we're starting to see maybe some of the initial stages of that. So it's it's a little bit of disappointment on both fronts, but from our perspective, you know, not strong enough to break the camel's back here on this ongoing expansion.

I want to talk about positioning because we are continuing to see the market selling off about an hour into the trading day here. Off of that jolts data, only kind of furthering this idea of too much weakness in the labor market. Mike, what are you telling clients who are calling you stressed out about the macro backdrop right now in terms of positioning?

Sure. You know, we we have a neutral position right now in our portfolios, recognizing we're in a late stage expansion. We think the risks are actually relatively balanced here. Um but our concern with some of the valuations we're seeing on the particularly the large cap growth side. And you know, when it comes to positioning, we're watching sentiment very closely. Uh you you really want to be on your toes for when the bottom starts to fall out and you get full capitulation, but we're nowhere close to that. You know, we've started the month down a little bit, but um we're continuing to monitor the sentiment really closely because you can actually get some decent opportunities there. If you can identify when, uh you know, you're getting panic selling, but the economy is actually holding up reasonably well, those are decently attractive entry points into markets. We don't think we're there yet, but we're going to monitor for that really closely over the next few weeks.

All right, fascinating stuff there. Mike Reynolds, who is the Glen Mead VP of investment strategy. Thanks so much for taking the time here with us today.

Take care.