Just had a meeting all night, and upon returning, I found that the June ADP data was quite shocking, recording a decrease of 33,000 people, which means that private sector employment not only did not grow but actually saw a net decrease.

ADP's negative value is usually a precursor to weakness in non-farm employment. If Thursday's non-farm employment report continues to fall significantly short of expectations, market confidence in a soft landing for the economy will begin to collapse. Logically, this should be a sign of recession, but why did the market rise?

Because the market is shifting to bet on a hard landing for the economy + rapid interest rate cuts + expectations of a new round of QE. If this is indeed the path we are taking, it indicates that the upcoming interest rate cuts may not be a good thing; they will shift from normal cuts due to reduced inflation to defensive cuts aimed at preventing economic recession.

Of course, there have been many instances where ADP data and non-farm data were completely different, so we still need to wait for the specific non-farm data to be released on Thursday. The current market is a typical case of bad data being treated as good data expectations.

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