Market Buzz: Exceedingly Strong Jobs Report Spurs Rising Risk

December Job Boom Sends Markets Downturning Into the Weekend

Friday’s staggering U.S. labor report made stocks feel a little cramped, causing many to pull back over the weekend and fire up expectations for a slide in Fed policy.

What the Numbers Say

Non‑farm payrolls jumped 256k – the biggest monthly spike since March 2023.
Unemployment dipped to 4.1% – a tidy swoop that erased November’s surprise rise.
Wages climbed 0.3% month‑over‑month and 3.9% year‑on‑year, keeping them firmly squarely at “not inflationary” status.

While the numbers look like a health check for the job market, they also raise eyebrows at the Fed. A strong job report suggests the policy committee might decide to stay on the sidelines longer than expected, nudging the economy toward a more neutral stance.

Hawks vs. Bears

Over the past year, Fed hawks have been in the lead, wary of a round of upside inflation risks that are surely lurking for 2025. The January “skip” – expected by many – could turn into a protracted pause, making markets uneasy.

Meanwhile, bond bears are riding the wave. Treasury yields climbed across the curve, and in the UK, Gilts have been on shaky ground as the dollar seizes the spotlight.

The Dollar’s Ride

Euro banknotes feel a touch shy, and the GBP is taking a nosedive toward the 1.22 corridor. Investors seem to be keeping their options open until we see President‑elect Trump’s first policy moves. Until then, most will stay flat, short fixed‑income, and long USD.

What to Do

If the dollar dips, now’s a good time to buy.
For the short haul, expect equity strength to fade a bit.
Longer‑term, the most likely path to upside is the path of least resistance.

Looking Ahead: The Busy Week Ahead

There’s a lot to keep an eye on over the next week:

Wednesday’s U.S. CPI – a headline risk event that could sway markets back into a hawkish stance. The December retail sales report also offers a glimpse of consumer strength in the U.S.
UK Mid‑Week Inflation – the best bet for the Bank of England’s next move. It looks at odds of a 25‑bp cut at the start of next month.
10‑ and 20‑year auction week for Gilts – a real pain point for the fragile Gilt market.
Q4 earnings season kicks off – start with banks, then pivot to “big tech” later.

With the U.S. market gearing up for Q4 earnings and the inevitable Trump inauguration on the horizon, we’re more likely to see a measured risk stance than a wild one. The markets will stay on the lookout for any hints that policy might change faster than a cat on a hot tin roof.