We expect headline job gains in Dec inched up to 85k from Nov’s 64k supported by stronger private sector hiring. Government employment likely edged up following a one-off negative impact from DOGE-related resignations. The unemployment rate likely fell to 4.5%, unwinding November’s shutdown-related distortion with lower claims and easing job loss concerns pointing to near-term mean reversion. But there is some elevated uncertainty with respect to our unemployment rate forecast due to last 2 month combined readings, lower survey response rate & composite weighting changes. Leading indicators for the labor market has been largely +ve as see in low initial jobless claims, accelerating ADP's weekly measure of private employment growth & optimistic service sector surveys. In summary, we expect the Dec NFP report to show a stable labor market. If our expectations are correct, the 3month average of private sector gains will be near the upper end of Fed's breakeven NFP estimates. Hence we don't expect to see any rate cut till Powell term ends in May. We continue to expect 2 cuts of 25 bps each in June & Sep after a new Fed Chair arrives by May. We have been bullish on long end UST yields since 9th Nov when we had recommended shorting 10yr UST at then yield of 4.09. Currently it is at 4.19 and we have an eventual target of 4.30. We are bullish on DXY also at current levels and expect DXY to test 100.50 from the current 98.4 levels as US exceptionalism narrative returns with tax cuts, stable employment and AI led productivity growth. On US equities we have been optimistic since our early Nov. At the time of the release of our 8th Nov trade reco, S&P was at 6729 and currently it is at 6858. Our eventual target is 7015. US equities might be supported by stronger earnings due to forthcoming tax breaks as well as expected tariff relief coming soon from US Supreme Court.
