Investors Flee to Risk-free Assets, OECD and Labor Market

9 Jul 2021

Yesterday was not rich in important news. The data on jobless claims, which, although came out worse than forecasts, cannot be called failures in general.

And since there is a short pause in the news background, we can talk about more global things. For example, the yield on US Treasury bonds fell sharply this week. Note that a decrease in the yield on this instrument means an increase in demand for it. And treasury is, perhaps, the quintessence of a safe-haven asset or a risk-free investment. In general, investors en masse enter risk-free assets. The recent rally in gold and the strengthening dollar, which can also act as safe haven assets, confirm this.

What else does it say? Well, for example, that the time has come to sell on the US stock market. At least if the moods remain as they are.

The OECD recently published a study showing that developed countries will not return to pre-pandemic employment levels until the end of next year.

A couple of numbers for illustration. During the pandemic, around 114 million jobs were lost worldwide. At the moment, the number of unemployed is 8 million more than before the pandemic. In addition, at least 14 million more people are now inactive in the labor market in the OECD region.

As for the US, the latest figures for the NFP, as well as JOLTS (the number of vacancies published on Tuesday), showed that the US job market is in good shape. US employers are posting a record number of job openings for the second straight month as the rapidly recovering economy generates strong demand for workers. For example, in May, there was one job open for every unemployed American, which is much more typical of an economy with much lower unemployment.

In general, buying the dollar continues to appear to us as a basic trading idea for the foreign exchange market.