As an investor, your job is to carefully assess the risks against the rewards. A large part of that equation is knowing exactly where we are in the business cycle. For example, consider the following questions: (a) do you think we’re at the beginning or middle of an economic advance (with more to go)? or (b) do you think we’re about to encounter a significant change in direction? and (c) if so, is that change for the better or for the worse? Your answer is very important. It’s far better to invest (or take more risk) at the start of the business cycle vs the end. Therefore, how will make that decision? How are you able to determine where we are? I will offer a market signal which is arguably more consistent and reliable than most indicators.
Fed Reserve
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Wall Street Cheer a “Strong Jobs” Report… Should They?
Wall St. cheered a perceived ‘strong’ monthly June jobs report. The economy added 206K jobs last month – however the unemployment rate moved to 4.1% – its highest level in 2 years. Here’s the thing: there was a lot of weakness in the labor market – with most of the jobs coming from government. In addition, April’s job gains were revised lower by 111K. And May was revised lower by almost 60K. I think there is material underlying weakness (reflected in slower Real GDP and PCE) and perhaps enough for the Fed to start cutting rates in September or November.
It’s Fed Week… Market Sees Cuts Coming
Are rates restrictive? And if they are – how do you know? That’s the question the Fed will address tomorrow – but it’s not easy to answer. For example, on the one hand there’s a (large) cohort who believe the Fed are falling ‘behind the curve’ – therefore increasing the odds of a recession. They feel that growth risks are to the downside – and do not need to wait for both inflation and employment data to confirm what’s ahead. On the other side of the coin – there are those who think we still run the risk of higher inflation if acting too early.