SPY, QQQ Gains Evaporate as Unemployment Hits Multi-Year Peak - Ray Dalio Sounds Bubble Alarm

Markets Get Reality Check

The party's over for major ETFs as economic headwinds blow away recent advances. Unemployment numbers paint a grim picture - hitting levels not seen in years.

Dalio's Warning Shot

The legendary investor drops a bombshell bubble warning, suggesting the market's been floating on hot air. His timing couldn't be more precise as indicators flash red.

Numbers Don't Lie

While Wall Street analysts scramble to revise their sunny forecasts, the hard data tells a different story. Multi-year highs in unemployment coupled with vanishing gains create the perfect storm.

Finance's favorite pastime? Rearranging deck chairs on the Titanic while collecting management fees. The only thing rising faster than unemployment might be advisor commissions.

TipRanks Black Friday Sale

• Claim 60% off TipRanks Premium for the data-backed insights and research tools you need to invest with confidence.
• Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off

While Nvidia’s (NVDA) strong quarter provided a boost to the ETFs, the Bureau of Labor Statistics’ (BLS) jobs report and market warnings from Fed Governor Lisa Cook and Bridgewater founder RAY Dalio ultimately steered stocks lower.

September’s jobs report, which was delayed by six weeks due to the government shutdown, showed nonfarm payrolls rising by 119,000, above the estimate of 50,000. At the same time, the BLS revised August’s payrolls to a loss of 4,000 from 22,000 additions, and the unemployment rate ticked higher to 4.4%, the highest level since October 2021.

“Bottom line: The economy added an average of 44k jobs a month for the past 4 months. That’s barely ‘treading water’ and explains why unemployment is now 4.4% –> highest since Oct 2021,” said Navy Federal Credit Union Chief Economist Heather Long in an X post.

Furthermore, Dalio said on CNBC’s “Squawk Box” that “There’s definitely a bubble in markets.” He described a bubble as an “unsustained amount of buying” and an “unsustained amount of valuation,” adding that the current market environment is 80% of the way there compared with the bubbles seen in 1929 and 2000.

“Don’t sell just because there’s a bubble,” he said. “But if you look at the correlations with the next 10 years’ returns, when you are in that territory, you get very low returns.”

Dalio doesn’t see an immediate catalyst that WOULD pop the bubble, although he explained that previous catalysts included tightening monetary policy, wealth taxes, and the need for cash. He recommended portfolio allocation to gold (XAUUSD), a safe-haven asset, in order to reduce risk.

Fed Governor Lisa Cook added to pressure after she warned of an “increased likelihood of outsized asset price declines” amid elevated valuations in stocks, bonds, Leveraged loans, and the housing markets. On the bright side, Cook believes that the financial system is resilient enough to sustain such an event without realizing a significant impact.

The S&P 500 (SPX) closed with a 1.56% loss, while the Nasdaq 100 (NDX) fell by 2.38%.