The ADP jobs report shows a surprise jobs loss… the “Big, Beautiful Bill” is close to the finish line… a new trade deal with Vietnam… our latest installment of our trading series
The ADP jobs report showed a big miss this morning.
June’s private sector hiring was forecasted to come in at 98,000. Instead, it showed the first loss since March of 2023, with 33,000 jobs disappearing.
May’s figure was also revised lower from 37,000 to just 29,000.
Here’s Nela Richardson, ADP’s chief economist:
Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month.
Now, this private sector report doesn’t always sync up with the government’s jobs report, which is what the Federal Reserve members consider most in gauging the jobs market. We’ll get that data tomorrow. But today’s numbers are eye-catching and hint at growing weakness in the economy.
Will it make a difference for the Fed and the timing of its first rate cut?
This morning, legendary investor Louis Navellier explained why he sees the Fed cutting later this month.
Let’s jump to his Flash Alert podcast in Growth Investor:
[On Monday, Chair Powell said the Fed], would’ve cut had it not been for the tariffs…
Powell went on to say regarding their meeting in July, he said, “He really can’t say, [about what the Fed will decide about cuts]” and then he said it’s going to depend on the data.
That’s a big deal, folks – that last statement, because the Fed was ignoring the economic data.
Inflation has come in well below economists’ expectations. The Fed was fighting an inflation bogeyman that never materialized. So, this is a really, really big deal.
Obviously, Fed Chairman Powell is defeated. He’s embarrassed himself. President Trump continues to humiliate him. He’s a lame duck.
Multiple Fed officials – three and rising – are calling for a July rate cut, and bond yields are falling. And the Fed never fights market rates.
So, we’re going to get a rate cut at the end of July. It’s going to help extend this rally we’ve had.
A rate cut would make President Trump happy. If you missed it, there’s a photo making the rounds of a handwritten personal note from the President to Chair Powell on Monday reading:
Jerome — You are as, usual, ‘Too Late.’ You have cost the USA A Fortune — and continue to do so — You should lower the rate — By A Lot!
We can’t show it due to copyright infringement, but it’s easy to find online.
Meanwhile, President Trump’s “Big, Beautiful Bill” cleared a big hurdle yesterday but is running into fresh headwinds
Yesterday, President Trump’s “One Big Beautiful Bill Act” passed the Senate 51-50, with Vice President JD Vance casting a final, tie-breaking vote.
Given that this is set up as a budget reconciliation bill, it has now returned to the House, where Representatives must accept the Senate’s changes as part of the special legislative process called “reconciliation.” This allows Congress to pass certain budget-related bills with a simple majority in the Senate – bypassing the usual 60-vote filibuster threshold.
Since the Senate made changes to the House-passed version of the “Big Beautiful Bill,” the House has two options:
- Accept the Senate version, after which the bill would go to the President’s desk to be signed
- Vote it down or amend it again, after which it would go back to the Senate or to a conference committee.
President Trump hoped to have the bill accepted and on his desk by this Friday’s July 4th holiday, but pushback is growing.
Here’s CNBC:
House Speaker Mike Johnson can lose the votes of just three members and still pass the package on a party line.
But as of early Wednesday, more than a dozen House Republicans were still opposed to it for various reasons.
If the holdouts demand any changes, the bill would automatically return to the Senate for another vote. This would mean Trump’s preferred July 4th deadline is likely off the table.
Love or hate the bill, if it doesn’t pass at some point, the market is likely in for a selloff
Let’s return to Louis:
As you might imagine, everybody is whining and complaining about [the bill].
But if they don’t pass the bill, taxes go up. And if they do pass the bill, taxes go down.
So that tax cut puts more money in consumers’ pockets, boosts consumer confidence and hopefully, the velocity of money picks up and we grow and prosper.
To make sure we’re all on the same page, the bill makes permanent the tax cuts from President Trump’s 2017 Tax Cuts and Jobs Act. If not passed, approximately 62% of U.S. taxpayers will face higher federal income taxes after the provisions expire at the end of the year.
Here’s more from the Heritage Foundation:
Americans could face the largest tax increase in generations.
Most of the provisions of the 2017 Tax Cuts and Jobs Act are scheduled to expire at the end of 2025. If Congress allows the tax law to expire, 15 major provisions or sets of provisions would expire or change, mostly leading to higher taxes.
Individual tax rates would increase, and the standard deduction and child tax credit would be cut in half.
More Americans would be liable for the alternative minimum tax and estate tax, and the number of taxpayers itemizing deductions would triple.
Businesses would face higher taxes with the expiration of the pass-through deduction and expensing provisions, as well as higher taxes on companies with international operations.
The stock market – now at record highs – is priced in expectation of the permanent adoption of these tax cuts. So, if they don’t materialize, we’ll likely face a fresh round of volatility.
Meanwhile, a new trade deal in the books
We’re less than a week away from the end of the 90-day pause on Liberation Day tariffs, and this morning, President Trump announced a trade deal with Vietnam.
Here’s Trump’s post on Truth Social:
Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping.
In return, Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade.
In other words, they will “OPEN THEIR MARKET TO THE UNITED STATES,” meaning that, we will be able to sell our product into Vietnam at ZERO Tariff.
To make sure we’re all on the same page, “transshipping” is the process by which countries circumvent trade barriers. China has used Vietnam as a transshipment hub for years.
Even though the end of the tariff pause is fast approaching, the market no longer views the liberation day deadline with fear since Trump has signaled that he will ignore or revise prior tariff policy. However, the announced deal is boosting markets as I write early afternoon.
We’d love to get more of these deals locked in. But some could prove more challenging than others.
For the next drama, keep your eye on Japan. Here’s President Trump from Tuesday:
I’m not sure if we’re gonna make a deal, I doubt it, with Japan.
They and others are so spoiled from having ripped us off for 30, 40 years that it’s really hard for them to make a deal.
We’ll keep you updated.
Our next installment of our trading series featuring Jonathan Rose
Last week, we began a new series in which we pull back the curtain on different ways to trade.
We love buy-and-hold investing, but trading provides investors with several advantages:
- The potential for much faster returns
- The potential for much larger annualized returns
- The ability to profit from rising and falling markets
- The ability to hedge your long positions
Today, let’s pick back up in our series to look at one of the ways veteran trader Jonathan Rose approaches the market – something called “divergence” trading.
First, if you’re less familiar with Jonathan, he earned his stripes at the Chicago Board Options Exchange. He’s made more than $10 million over the course of his career, profiting from bull markets, bear markets, and everything in between.
Though Jonathan trades in a variety of ways, one of his favorites relies on divergences. This is the approach he’s used to make millions of dollars in his own account.
Here’s Jonathan with the big-picture description:
I call it divergence trading because you’re looking for moments when stocks that usually move in line suddenly diverge. Then you place trades that profit when they come back in line again.
I don’t make binary bets on whether a stock will go up or down like most rookie traders do.
Instead, I look for relationships between stocks that usually move together – but occasionally break apart. Then I bet on those relationships coming back into line.
Let me show you an example to see it better.
Jonathan’s “crack spread” divergence from back in May
In our May 16 Digest, we highlighted Jonathan’s analysis on oil refiners.
From Jonathan in that issue:
One area I’m laser-focused on right now: refiners.
The crack spread—which is basically the profit margin refiners earn turning crude into gasoline and diesel—has surged over 30% since mid-March. That kind of divergence doesn’t last forever.
To illustrate, Jonathan provided a chart that I’ll show you below.
The yellow line represents the crack spread. You’ll see how it had become increasingly disconnected from a basket of refiner stocks.
This creates opportunity for creative traders.
When margins are expanding and the equities haven’t caught up, we’ve got a window to strike.
This is the exact kind of setup I love to track… because when the market catches on, the move can be fast and aggressive.
So, what happened?
Since that May 16 Digest, while the S&P has climbed about 4%, HF Sinclair (DINO) – which Jonathan highlighted in his research – has 4X’d the S&P, jumping nearly 17%.
Now, not all refiners have returned this much, but that’s where Jonathan would use additional metrics and indicators to point him toward the specific ways to play this divergent trade. But this is the essence of this market approach.
By the way, if you play that 17% gain with an option, suddenly you’re talking about serious money in just a matter of weeks – potentially, triple digits.
Back to Jonathan for what’s on the table with a well-executed divergence trade with an option:
I’ve used the same strategy to close out gains of…
- 122% in 35 days
- 127% in 5 days
- 142% in 39 days
- 322% in 32 days
- 411% in 39 days
- 752% in 40 days
- 805% in 70 days
- And 967% in 52 days
This trading style the potential to deliver thousands of dollars in profits without you taking crazy risks with your money.
Given how popular and effective this trading style is, we’ll bring you more about it over the coming days. But for now, if you’d like a deeper dive, Jonathan just put together a new divergence trading presentation. It distills his nearly 30 years of experience as a professional trader into one short video.
And as a reminder, join Jonathan for his free Masters in Trading Live broadcasts at 11:00 a.m. every day the market is open. They’re a fantastic way to learn more about trading, while also giving you the tools to put a wad of cash in your pocket.
We’ll keep you updated on all these stories here in the Digest.
Have a good evening,
Jeff Remsburg
