The United States jobs recovery slowed down slightly in September, but the employment recovery is still faster than in most comparable economies. The jobs report showed a healthy 661,000 gain in non-farm payrolls last month. Much of the difference with consensus came from shifts in government payrolls, which fell 216,000 in September. However, private payrolls rose by a healthy 877,000. This means that unemployment may have fallen below the 8.1% level in September.

One of the most repeated sentences in the financial media is: “do not fight central banks”, making the argument that you have to be invested in equities and especially in the most cyclical part because central banks increase money supply and support risky assets.

Reality shows us otherwise. Following the central bank only works in the United States and particularly in technology companies. In Europe, following the central bank is not only a bad idea. It is counterproductive.

The balance sheet of the European Central Bank has expanded more than 147% since 2014 and the Stoxx 600 index, which includes the 600 most important companies in Europe, has appreciated just over a paltry 4%. There is a similar story in emerging markets. Global money supply has soared to all-time highs and the Emerging Market MSCI Index has barely appreciated by 5%. In fact, investors are taking significantly more risk only to follow monetary policy for weaker results.

The rise in Covid-19 cases in countries like France and Spain has increased the risk of new
lockdowns. Governments should understand by now that shutting down the economy is highly
inefficient and devastating for jobs and business solvency. However, as we have seen in Spain, many governments simply decide to start new lockdowns in order to show that they are taking aggressive measures, even knowing that these generate more negative effects and have no real impact on preserving health. Instead of looking at the examples of South Korea, Taiwan, Sweden or Austria, where simple but effective measures have resulted in better management of the health crisis, some European governments are ignoring the economic and social long-term disaster that closing down the economy has created and seem prepared to repeat the past mistakes.