Hey folks, over and over we’re hearing a consistent theme about these markets; -low unemployment, low interest rates and yet inflation remains stubbornly low – how can this be? What is going on here?? Well one thing the financial markets will always give you are new scenarios that are based upon simple principals that will never change and this time it is no different.
Weekly Sound bites:
• End of Times! Inflation dead; Wages Up; Unemployment down to 3.6% (around 50 yr. low); Interest rates down to 2.53%; Recession Fears disappeared! Is an inversion to the 70s in the US where inflation soared into double digits with high unemployment…all of today shows the US economic expansion will be 10 years long in June and be the longest on record in July…while this expansion has been long it also has been the weakest on record averaging only 2.3% GDP growth while past expansions averaged over 3.8%…in fact, to start this year the Dow is up 14% (best start since 1999); S&P is up 16% (best start since 1987); NASDAQ is up 21.14% (best start since 1991)
• It now appears the US and Europe will be in a stagflation vs inflation battle which is what Japan has faced for the past 3 decades…The FEDs in fact are in a Policy Review about how to best handle this new scenario of low unemployment, low inflation and interest rates…we could hear it from “Power Ranger Boom Boom” Powell himself at this past week’s FOMC Press Conf where he stated that inflation is “transitory”…meaning he feels it will move higher which is almost opposite of what the Bond markets think; –they have over a 60% of a rate cut by year end to “goose” inflation higher should “transitory” become persistent!
Enjoy my take on this past week in my Weekly Market Round-Up:
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra