Nico's Weekly Insights: Job Losses Signal the Twin Bubbles Are Cracking

Introduction

Welcome to your weekly briefing.

For months, we've discussed the widening chasm between euphoric market highs and a deteriorating economic reality.

This week, the facade finally cracked. The latest jobs reports from both the U.S. and Canada didn't just miss expectations—they revealed a structural slowdown that can no longer be ignored.

Combined with a rare, century-old crash indicator flashing red and the looming threat of simultaneous housing and stock market bubbles, my analysis is clear: the period of calm is over, and the risks of a significant correction are intensifying. It is time to be prepared, not permanently optimistic that the market will only go up.

The Week's Key Information - The Jobs Market Collapses

The mainstream narrative of a "resilient" U.S. economy was shattered this week by a cascade of weak labor market data.

The August nonfarm payrolls report showed a dismal gain of only 22,000 jobs, far below the 75,000 expected. This was corroborated by weak ADP numbers, which track private sector job growth; a significant increase in layoffs reported by Challenger; and a JOLTS report showing a sharp drop in job openings to a level now below the number of unemployed people. The official unemployment rate also climbed to 4.3%, its highest level in nearly four years (a preliminary figure that is often revised higher).

What makes this a definitive turning point are the massive downward revisions to previous months. June’s data, initially reported as a strong gain of approximately 147,000 jobs—a figure used to justify an aggressive monetary policy of keeping interest rates high—was revised for a second time to a net loss of -13,000 jobs.

Historically, negative payroll prints of this nature only occur immediately before or during a recession. This isn't just one bad data point; it's a confirmation that the real economy has been sputtering for months, hidden behind unreliable data.

The situation is mirrored in Canada, which posted another month of widespread job losses and saw its unemployment rate climb to 7.1%.

Other Key Insights from the Week

Beneath the jobs data, other signals confirm the foundation is cracking:

• Twin Bubbles Approaching a Reckoning: We are facing unprecedented twin bubbles: a tech-driven stock market bubble reminiscent of 2001 occurring simultaneously with a real estate bubble similar to 2008. Both asset classes are at extreme valuations after years of ultra-low interest rates. Canada’s housing market, already down 18% since its 2022 peak (and much more when adjusting for inflation), serves as a leading indicator for the U.S., with both nations facing an affordability crisis and a looming wave of mortgage renewals at higher rates. These bubbles pose a catastrophic risk to the over-60 demographic, which represents 30% of North America's population but holds over 50% of the wealth, heavily concentrated in these two asset classes.

  
  

• A Reliable Crash Indicator Flashes Red: The Dow Theory divergence, an indicator that has preceded every major crash over the last 100 years (including 1929, 2000, and 2008), has been triggered. The Dow Jones Industrial Average hit a new all-time high, but the Dow Jones Transportation Average failed to confirm it. This signals a dangerous disconnect between financial markets and the real economy, which relies on the transportation of physical goods.

  • 

    
    
    
    

• A Potential Major Catalyst on the Horizon: A significant legal and economic development is flying under the radar. The Trump administration is bringing its case to the Supreme Court after an appellate court ruled its tariffs unconstitutional. A final ruling against the administration would have massive repercussions, potentially forcing a refund of all tariffs collected to date and significantly impacting the stock market and the global standing of the U.S. dollar.

Under the Radar

This week also saw a critical development in the precious metals market that received little mainstream attention:

• China’s New Gold Mandate: In a landmark move, China has mandated that its insurance companies allocate 1% of their assets to gold. This shift will likely be funded by reducing their holdings of U.S. Treasuries, representing a significant structural demand for gold and a step away from the U.S. dollar by a major global player.

Looking Forward

The next two weeks are critical. I will be closely monitoring these key dates:

• Tuesday, September 9th: The crucial QCEW job data revisions in the U.S. are due. This release is highly anticipated, with expectations that it could erase as many as one million previously reported "jobs created," which would officially confirm the labor market has been significantly weaker than reported for over a year.

  
  

• Wednesday, September 10th: U.S. Producer Price Index (PPI) data for August will provide a key inflation reading.

  
  

• Thursday, September 11th: The European Central Bank (ECB) will make its interest rate decision.

  
  

• Wednesday, September 17th: A pivotal day, with both the U.S. Federal Reserve (FOMC) and the Bank of Canada (BoC) announcing their interest rate decisions. The severity of recent data suggests both central banks will be under immense pressure to cut rates by at least 25 basis points (0.25%), with the possibility of a more aggressive 50-basis-point cut being much higher than markets currently expect.

What This All Means: Three Potential Pathways Forward

It is usually not recommended to make predictions, and even less so to give them a timeframe. Today I will break both rules to share three potential scenarios based on my analysis. Of course, this is not financial advice.

• Scenario A: The Pullback & Blow-Off Top. The stock market drops between -5% and -15% in September-October, followed by a final euphoric rally. Then, in the first half of 2026, a massive stock market crash (e.g., -50%) begins.

  
  

• Scenario B: The Top Is In. The market top is either in the rearview mirror or very close (+/- 3%). The first phase of a new bear market starts this fall with a -15% to -25% drop, followed by a temporary bounce that gives false hope before the final, steeper phase of the crash begins (also likely in early 2026).

  
  

• Scenario C: The "Crash Up." Financial assets like stocks appear to rise rapidly in price, but only because the currency they are priced in (e.g., the U.S. dollar) is rapidly losing its purchasing power. The real value of these assets, when measured against hard money like gold, would actually be flat or declining. This is often triggered by massive government stimulus programs financed by "money printing."

  • 

Your Path from Uncertainty to Control

The disconnect between the headlines and the real economy can be confusing and unsettling. My process is designed to cut through the noise and provide you with a clear, repeatable strategy for managing risk regardless of which scenario unfolds. If the idea of investing with a process, not a panic button, resonates with you, here are two ways to start building a truly resilient strategy:

• For a Focused Deep-Dive: Book a Jumpstart Session. In this single, high-impact session, we can tackle a specific challenge you're facing and master one key strategy to give you immediate control.

  
  

• To Explore Your Goals: Book a free, no-pressure strategy call. We can discuss your situation and determine if my educational coaching approach is the right fit for you.