Episode summary
New Worries
The Markets
· · Hosts: Chris Hussey · Guests: Josh Schiffrin
Summary
A weaker-than-expected payrolls report added to an already unsettled market, but Josh Schiffrin said the bigger driver is still geopolitics and energy. He said the unemployment rate’s move up to 4.4 is the most important labor-market data point to watch, though he does not think one weak report alone changes the broader outlook.
Schiffrin argued that higher oil prices are complicating the macro picture by pressuring growth, lifting inflation, and challenging the year’s earlier market themes of stronger growth, returning inflation, and further Fed easing. He said uncertainty bands have widened materially and that the combination of inflation pressure and slower growth makes the environment more difficult for the Federal Reserve.
On policy, Schiffrin still thinks the next Fed move is a cut, not a hike, even with an oil shock. In markets, he said there has already been some positioning reduction and that more could follow if the conflict persists. His main trading focus is oil, but he said investors should generally stay close to home and only take positions where they have strong long-term conviction, including his view that the U.S. curve should steepen over time.
Key takeaways
- Josh Schiffrin said the payrolls report was clearly weaker than expected, but the unemployment rate’s rise to 4.4 is the key labor data to monitor.
- He said higher oil prices hurt growth, raise inflation, and undermine the year-to-date theme of U.S. underperformance versus the rest of the world.
- Schiffrin still expects the Fed’s next move to be a cut, though he thinks an oil shock makes the timing and pace more complicated.
- He said positioning has already been reduced this week, with the potential for more de-risking if geopolitical conflict continues.
- Oil is the market to watch most closely, in his view, because it is driving inflation concerns and knock-on effects across assets.
Notable quotes
“I think it was a clearly weaker-than-expected number. You know, maybe noisy due to, you know, the birth/death model, weather, you know, and other potentially more transient factors”
“I think that higher oil prices clearly complicate all of that to varying degrees. It hurts the growth outlook. It increases the inflation outlook”
How the episode opens
This is The Markets. I'm Chris Hussey and today is Friday, March 6th. And I'm here on the Goldman Sachs trading floor with Josh Schiffrin, who is Chief Strategy Officer and Head of Financial Risk for Global Banking & Markets.
Josh, thanks so much for joining us. Nice to be with you today. What a week.
And what a day, again. We just got payrolls. Came in weak.
What do you make of the number? What do you make of the market reaction? I think it was a clearly weaker-than-expected number.
You know, maybe noisy due to, you know, the birth/death model, weather, you know, and other potentially more transient factors. It's only one month. But I do think it was a weaker than expected number.
I'm most focused on the unemployment rate which ticked up to 4.4. I think that's an extremely key variable to watch. I also think, you know, that's not the market's focus right now.
The market's clearly focused on geopolitics, energy markets. All right, so let's jump to the geopolitics and the energy markets because that is the story still. It's even overshadowing the payrolls report this week.
What is the situation today as you see it now? Are we getting to a pressure point because of the amount of time this geopolitical risk has been elevated? Or is it something else?
Geopolitics are clearly in focus. I think that the uncertainty bands have widened materially. But I think the key thing is, themes this week have been counter to that from the first two months of the year, which was characterized by expectations of strong growth, inflation returning to target, and the possibility of further Fed easing.
I think that higher oil prices clearly complicate all of that to varying degrees. It hurts the growth outlook.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- weaker-than-expected employment report
- geopolitical concerns
- market volatility
- investor risk management
- financial risk
Companies and tickers mentioned
- Goldman Sachs Global Banking & Markets
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Markets, this episode and its artwork belong to Goldman Sachs. Octagon is not affiliated with the show; this page is an independent summary.
