Bank of America says that trade will get another boost if the November jobs report comes in strong.

Jobs Report Could Boost 'American Exceptionalism' Trade, Says Bank of America

The "American exceptionalism" theme that has fueled a rally in U.S. markets since Donald Trump's election continues to drive the S&P 500 and the dollar higher, according to Bank of America (BofA). A strong November jobs report this week could further strengthen this trend, the bank's analysts say.

Key Highlights:

"American Exceptionalism" Momentum:

The concept has gained traction, supported by Trump's "America First" policies, such as tariffs aimed at bolstering domestic manufacturing.

Market Impact So Far:

U.S. stocks have outperformed global equities by 3 percentage points since the election.

The dollar has risen by 2.9%.

The correlation between the S&P 500 and the dollar is at its highest since 2017, while the correlation between international stocks and the dollar has weakened.

The gap between these correlations is at its second-highest level ever, trailing only the 2016 election.

Jobs Report Expectations

Economists project that November’s employment data will show 214,000 new jobs, a sharp increase from October's 12,000 new hires.

BofA analysts believe the numbers could be even stronger due to:

1. The fading impact of recent hurricanes.

2. Resolution of the Boeing strike.

3. Possible upward revisions in response to low participation in October’s survey.

Potential Market Impact

A stronger-than-expected jobs report could reinforce the "American exceptionalism" narrative, pushing U.S. stocks and the dollar higher.

Analysts caution that within equities, the dominant sectors could shift if rate cuts are no longer anticipated.

Warning for Traders

BofA advises caution when interpreting the initial jobs data:

First Data Caution: The initial report might not fully capture market conditions.

Revisions Matter: More accurate insights often come with the first and second revisions of the data.

Conclusion

The November jobs report could act as a catalyst for continued market gains under the "American exceptionalism" theme. However, traders are urged to analyze the data carefully and wait for revisions to make informed decisions.