Stark

Today’s lesson is a simple one, kids. Bad news is sometimes good news. Actually, quite often. Like now.

The US economy is losing altitude. Fast. Debt is swelling. Tariffs are hurting. Social support programs are wilting. The war is costing a bundle. Allies are shrinking away. Washington has been both weaponized and gutted – meaning Iran can hack local water systems or 21,000 people have explosive diarrhea, for lack of regulators and inspectors. Affordability is a major issue. Inflation (3.5%) now exceeds wage growth (3.2%).

And today we heard that 23,000 jobs were lost last month when economists had expected growth of 90,000. In fact, the employment trend has been crash-landing for a while. Compared to the Biden years, Trump 2.0 has been a labour disaster – despite the fact 47 fired the federal jobs czar because he didn’t like the data.

Any, back to the lesson. This is good news if you have stocks, funds or a portfolio with equity exposure – because markets are cheering. More record highs on Wall Street in the wake of the lousy non-farm payrolls report

Huh?

Labour weakness and tepid economic growth mean interest rates may not be rising soon, or at all, as Mr. Market had expected just a few weeks ago. The odds of a hike at next month’s setting just plopped – from 67% down to 41%.

Markets, investors and corps want cheap money plus stability. So the news today means stocks are gaining and bond yields are falling. If the Iran war winds down – and even if the Bad Guys get to control the Strait (which is almost certain to be the outcome) – oil will stabilize, inflation will be less of a threat and the Fed will probably start thinking about rate cuts, not hikes. Just as the president wants.

Also, class, recall what’s happening to the American stock market. Now over half the S&P 500 is made up of tech and AI issues. In fact, specialized AI-related stocks alone constitute 45% of the market’s value. (Clunky tractor-maker Caterpillar, for example, just had a $20-billion revenue quarter since it’s selling so many turbines to AI data centres.)

This entire industry is making, spending and borrowing hundreds of billions. Data centre construction alone will exceed $1 trillion in the next twelve months, so higher interest rates on a steaming pile of debt would be bad news. Lower or stable rates would be better news. So a lousy jobs report is great news.

Lesson: stay invested. Corporate profits are expected to be 50% higher than those of a year ago for S&P companies. Yes, the market is putting a lot of daylight between itself and the real economy, but if Bezos, Musk and Zuk can make boodles more money, so can you.

Now, let’s recall the maple-slurping jingoism of the post two days ago. Canada rocks, as it turns out. Dija see today’s jobs tally?

The gain last month was 73,000, about half of them full-time. Given the fact the US economy is more than ten times the size of ours, this was an elephantine advance.

“Landing on day of a soft U.S. payroll result, the contrast with Canada’s surprisingly upbeat reading is stark,” says Bay Street economist Doug Porter. “Not unlike the GDP bounce from weakness at the turn in the year, the job figures are very much echoing the rebound.”

Indeed. Inflation in Canada is lower. Job creation more robust. GDP growth here will exceed that there. Interest rates are more than a full 1% less. And our stock market has outpaced Wall Street. Wages in Canada are ahead of inflation. Theirs are behind. Our mortgages are under 4%. Theirs are almost 7%. We are at peace. They’re at war, or whatever.

Every day the evidence mounts that this is one of the best places on the planet to live. Certainly compared to the dominant nation and economy in the world, little Canada is a haven of stability, rationality and calm.

As for investing, stay the course. About 60% of your portfolio should be equity-based, with thirds in Canada, the US and international. Also own bond funds. Own REITs. Own preferreds. There will be stock market corrections coming – especially given the drama of the Trump era – so having the balance of 40% in lower-risk and income-generating assets is key. Stick with that asset allocation we gave you recently. Keep eschewing individual stocks and choose ETFs, for greater diversity and less risk.

Remember that the only things you truly control are the actions you take. You live in a good time, in a good place. Embrace it.

About the picture: “I am on the back end of my working years and am in an infinitely more comfortable position because of the wisdom you have shared on your free blog so thank you for that,” writes Dawn. “I don’t bother with the comments. I snapped this photo last week while at Bent Stick Brewery in Edmonton.  You would appreciate the civility of this establishment that welcomes dog patrons.”

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Source: https://www.greaterfool.ca/2026/08/07/stark/