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What just happened? The S&P 500 just erased nearly -$2 TRILLION of market cap just hours after 3rd strongest US jobs report in 18 months. Meanwhile, Bitcoin is officially down over -50% from its record high in October 2025. What's happening? Let us explain. (a thread)
Just 3 days ago, the S&P 500 hit its highest level on record as AI stocks skyrocketed. Today, the S&P 500 posted its largest drop since October 2025. Meanwhile, the biggest news of the day was the 3rd strongest jobs report in 18 months. This has left many investors confused.
In fact, even President Trump commented on the decline after the jobs report. Trump said “stocks should go up, not down” after today’s jobs report. However, when you look beneath the surface, it's fairly clear that stock do NOT want a strong labor market over the near-term.
When the Fed made their first rate cut of 2025, it was specifically because of labor market weakness. The Fed explicitly stated "downside risks to employment have risen" and that's why they cut rates. It was NOT because inflation had reached the Fed's 2% target. It never did.
Inflation is now back up to 3.8% in the US amid the Iran War. However, the bond market had held on to hopes of rate cuts for some time because of the "weak" labor market. Today's jobs report has flipped that sentiment and the weakness of the labor market is being questioned.
On top of this, job openings data this week painted a similar narrative. JOLTs data showed that US job openings surged by a massive 731,000 jobs in April while NO change was expected. As a result, available employment hit 7.6 million for the month, the highest since May 2024.
As a result, we have seen the most hawkish shift in Fed expectations since post-pandemic stimulus. The BASE case shows two rate HIKES by early 2027. There is even a rising 17% chance of 3 rate HIKES by April 2027. Just months ago, markets saw up to 4 rate CUTS in 2026 alone.
Adding even more fuel to the fire is the drawdown in crypto, with Bitcoin now down -53% since October. In fact, Bitcoin is down 20% this week ALONE, with crypto erasing ~$2.5 trillion since October 2025. The bear market gained momentum this week and crushed risk appetite.
Then, FT said Meta is considering raising "tens of billions of dollars" through a stock offering to fund AI. This would be similar to the $85B equity raise by Google. Investors are now concerned: will big tech be flooding the market with equity raises to fund AI growth?
And to top it all off, SpaceX's $75B IPO is just days away. The amount of capital being raised here should not be underestimated. Funds are likely selling to make room for this IPO. Sum it all up, and the market, which was up 20%+ in 2 months was overdue for today's decline.
Unusual times lead to unusual swings in the market, and uncertainty is still very elevated. Our subscribers are capitalizing on these swings. Want to access our premium research? Subscribe at the link below to access our latest analysis and alerts: <a target="_blank" href="http://thekobeissiletter.com/subscribe" color="blue">thekobeissiletter.com/subscribe</a>
Lastly, we must put this into perspective. The S&P 500 rose +21% in 2 months and posted a 9-week win streak for the first time since 2023. Corrections are necessary and smart investors take advantage of it. Follow us @KobeissiLetter for real time analysis as this develops.
