Happy Friday from Copenhagen!

We haven’t had the best week, but we are thankfully still doing well in trades trending in a cutting cycle, such as the steepener (Z4 vs. H7).

The market is still grappling with a lack of true conviction in a slowdown of the US economy, and we share that sentiment. It is hard to see a true weakening in key figures outside of hiring-based labor market indicators like the NFP.

Interestingly, it is normal to see weak hiring ahead of the election in an election year, and if history is any guide, Oct-Dec will prove to be much stronger hiring-wise than the past 1-2 quarters. We note, however, that hiring has been even weaker than in a “normal election year,” suggesting that there is probably more to it this year.

As was alluded to in the Fed’s Beige Book in September: “Hiring has shifted to be primarily for replacement, rather than growth, and with uncertainty pertaining to the presidential election ahead, many firms have put hiring plans on hold.”

Chart of the week: Hiring is always weak ahead of the election during election years