The strong positive bubble readings in tech identified by the FCO supercomputer resolved last week in a steep correction. Given the price action in various sectors, the consensus among market technicians is that last week’s move was a “risk-on rotation” as investors trimmed high-priced FANG and growth stocks to purchase undervalued names in energy, financials, and other areas, which have been underperforming.

Though general valuation levels for the US stock market argue for below-average returns over the next decade, as Ed Easterling recently explained on our program, confidence in the growth outlook will continue to provide support for stock prices until market participants switch from risk-on internal rotations to risk-off external rotations into cash and bonds.

This final turning point will likely take place once earnings growth peaks, coinciding with a protracted economic slowdown in the world’s largest economy, which is why we decided to get an update from economic “superforecaster” Jim O’Sullivan at High Frequency Economics on our program last week.

We label O’Sullivan as a superforecaster not to inflate his importance but in honor of his track record and, most importantly, his signal-focused methodology, which appears to closely align with the traits Philip Tetlock identified in his book on how to become a superforecaster.

Here’s a clip from our recent interview where Jim comments on the underlying trend for employment in the US:

Jobless Claims Key Going Forward

With last month’s employment report coming in weaker than expected, some are concerned the US economy is at a turning point. O’Sullivan doesn’t see it this way, however.

“(Last month’s) employment report … was largely noise,” he said. “The payroll number came in at a 138,000 rise on the month, which is not a terribly weak number anyway. Over the long haul, it’s actually more than enough to meet labor force growth.”