This Could Twist the Fed's Arm (And It's Not Trump)

Jobs growth hits a two-year low... The Fed is starting to see things... The rate-cut standoff... A Trump-Putin phone call... Protecting 'old money'... Don't miss Porter Stansberry's market warning tomorrow...

---

For months, we've written about a 'frozen' labor market...

With all of the uncertainty surrounding the economy thanks to tariffs and central bank policy, jobs data tells us that companies aren't inclined to hire new staff. The better news: They're not laying people off, either.

We got more confirmation of that in Tuesday's Job Openings and Labor Turnover Survey ("JOLTS"). In April, job openings, hires, and quits all rose slightly from the month before, but they remained near the lowest levels since the COVID recovery in 2020 and 2021.

Then, this morning, payroll processor ADP released its hiring data for May. Last month, companies added 37,000 jobs, according to ADP. That was down from 60,000 job gains in April, falling to the lowest monthly growth since March 2023.

Not only that, but it didn't even come close to Wall Street's estimate of 110,000 new jobs. ADP's chief economist Nela Richardson put it simply: "After a strong start to the year, hiring is losing momentum."

Within the 10 business areas that ADP reports on, five lost jobs in May and five added jobs. The biggest losses came in "professional and business services" and "education and health services."

Bond yields fell, with the 10-year Treasury now yielding less than 4.4% (meaning prices rose), after the jobs report on today's open. And this makes sense...

Getting closer to forcing the Fed's hand...

The Federal Reserve has been in "wait and see" mode as the central bank tries to figure out the impact of tariffs. In its last quarterly summary of economic projections in March, the Fed raised its inflation forecast for 2025 (to 2.7%) and lowered its growth outlook (to 1.7%).

Those two outcomes typically lead to different actions from the Fed (rate cuts to boost growth... or rate hikes to lower inflation). So the Fed is waiting to see which needs its attention. And with inflation giving some good news lately, the job market and the economy may win out.

But the Fed is also concerned about tariff-related inflation, which could show up in data as soon as this summer.

So don't expect a rate cut soon. Even after the weak jobs report today, federal-funds futures traders are 96% certain that the Fed won't change interest rates in its June 18 policy decision.

Markets are now pricing in the first cut possibly coming in September. That's not soon enough for some...

In a post on Truth Social this morning, shortly after the ADP data came out, President Donald Trump once again called on Fed Chair Jerome Powell for rate cuts...

Trump has been calling for lower rates for months. And Powell has held firm, even reportedly telling Trump in a recent meeting that the Fed will only lower rates for economic reasons and will not bow to political pressure.

Well, ADP's jobs data might get the economy a step closer to forcing the Fed's hand when it comes to interest-rate cuts – even if Trump's insistence on lower rates doesn't.

Plenty more to come on jobs...

Tomorrow morning, consulting firm Challenger, Gray & Christmas releases its monthly job cuts report – which lately has served as a read-through to DOGE-related layoffs.

Also tomorrow, we get weekly jobless claims for the week ending May 31. Initial claims have been steady around the 200,000 level for about three years now. As we wrote in the February 20 Digest, initial claims might not matter... until they do. From that Digest...

The weekly jobless numbers are volatile. Without huge spikes or established trends in unemployment claims, they don't tell us much. That's the situation we have right now.

Continuing claims, on the other hand, offer a better picture of the labor market's health week to week. These are folks who claim unemployment benefits for more than one week in a row. And as of last week's report, continuing claims were at the highest level since November 2021.

On Friday, the Bureau of Labor Statistics will release its monthly nonfarm payroll report and the unemployment rate for May. If either (or both) of these reports follow ADP's lead in coming in weaker than expected, the Fed might consider cutting rates sooner.

In the short term, the market would welcome sooner-than-expected rate cuts. But if cuts are to come later this year, it may only happen because of further economic weakness like job losses piling up. That's not exactly "good" news for an S&P 500 Index back near all-time highs amid a "tariff pause" rally.

If you looked closely at the market today, you could see some action that aligned with this idea. Volatility was muted, but as yields fell, gold ticked toward a new all-time high, and the major U.S. stock indexes were mixed.

A midday Trump-Putin phone call...

Early this afternoon, Trump posted another update on social media. And this time, he reported speaking for more than an hour by phone with Russian President Vladimir Putin about the war in Ukraine, among other topics.

The primary takeaway: "It was a good conversation, but not a conversation that will lead to immediate Peace," Trump wrote. He said they talked about Ukraine's recent drone attacks on Russian airplanes and "various other attacks that have been taking place by both sides."

While a significant geopolitical development, the market didn't react in any significant way to news of this unexpected phone call. This tells us (again) that when it comes to an end to the war in Ukraine, Mr. Market might believe it only when he sees it.

Dripping in 'old money'...

Subscribers of our Portfolio Solutions products and Stansberry Alliance members received the latest issues and updates to our Total, Forever, and Quant portfolios last night.

We urge you to check them out, as usual. But today, I (Corey McLaughlin) want to highlight The Total Portfolio in particular.

In addition to updating subscribers on a roughly 6% gain in the portfolio allocation over the past four months, while the S&P 500 Index was down slightly in the same period, Director of Research Matt Weinschenk penned a must-read about one of our favorite types of businesses to own shares of in the long run...

Matt began by telling a story about how he was called down to an exclusive meeting in Virginia a few weeks ago to talk about this idea.

As he described, the "gentleman's club" setting was "dripping in old Southern money." (As Matt clarified, "That's 'gentleman's club' in the original sense of the term, not its modern euphemism.") Matt and Stansberry Research senior analyst Bryan Beach talked to the group about one of the best ways to protect your wealth... one that's often too easily ignored.

And then he expanded on a particular industry that we love at Stansberry Research. It's one you can invest in to protect your wealth and grow it over time while resting easy at night. As Matt put it...

The big idea that drove this meeting – what's simply one of the best and safest ways to build lasting wealth – is no secret. It has been out there for anyone to discover for at least 30 years.

We've written about it at Stansberry Research for the better part of a decade.

Warren Buffett has written about it in annual letters for much longer.

And the returns of the best stocks in the industry have shown investors exactly what this strategy can do.

Still, most investors pay zero attention to it. They say it's too boring or too much work. They're partially right. It is incredibly boring. But that's what makes it so powerful.

Longtime subscribers might already know what Matt's talking about. But if you don't, or even if you do and need a refresher on the best businesses from this industry (Matt examines two), be sure to check out the latest issue of The Total Portfolio here.

One final reminder...

Tomorrow, don't miss the debut of our founder Porter Stansberry's brand-new market briefing. If you haven't registered yet, you can do so here to ensure you don't miss anything.

With everything we've been seeing... like the bond-market volatility... gold prices surging more than 60% since the start of 2024... and what looks like even more spending coming from Washington, Porter is warning that we're not in a normal economic situation.

Rather, he's convinced that the financial system is reaching its breaking point, and the bond market is sending an unmistakable signal about it.

If you've followed Porter's work over the years, you know it pays to listen...

He called the bottom, nearly to the day, of the COVID-19 market panic in March 2020. And he said the major U.S. stock indexes would hit new all-time highs again by the end of that year – which they did.

And before the great financial crisis, he famously predicted the collapses of Fannie Mae, Freddie Mac, and General Motors. 

Porter says his new prediction is bigger than both of those. In short, one of America's biggest institutions is about to go broke, and millions of Americans are unprepared for what happens next.

Tomorrow, at 10 a.m. Eastern time, he'll explain more. He'll also explain why, even though stocks have rallied since Trump's tariff pause, this is far from the time to get complacent about your investments.

"Buy and hold" will doom unprepared investors, he says. But you can take a simple step to prepare now, and it doesn't involve gold, cryptocurrencies, or options. Tune in tomorrow for details.

He'll also share the name of what he calls "America's most dangerous investment today."

You can sign up here. The two-hour presentation covers a lot of ground, and it's totally free.

New 52-week highs (as of 6/3/25): Automatic Data Processing (ADP), Broadcom (AVGO), Cintas (CTAS), GE Vernova (GEV), iShares U.S. Aerospace & Defense Fund (ITA), New Gold (NGD), NetEase (NTES), Sandstorm Gold (SAND), Sprott (SII), Skeena Resources (SKE), Veeva Systems (VEEV), Telefônica Brasil (VIV), and Verisk Analytics (VRSK).

One clarification before the mail. In yesterday's issue, we mentioned a pair of Republicans wanting to see more spending cuts in the "big, beautiful bill." But we should have identified them as two members of Congress rather than as two senators. Rand Paul is a senator, but of course Thomas Massie's in the House. Thanks to Alliance member Bob M. for pointing out the error.

Now, in the mail today, another vote for an agreement made by the Trump administration, which we discussed yesterday... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"I also consider the trade deal with Ukraine to be substantial and important, thus the trade deal with the UK is not the only one." – Subscriber Michael U.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
June 4, 2025