As the Fed Confronts the Inflation/Recession Dilemma, Markets Display Signs of Indigestion

Employment numbers for December were much weaker than expected with net new job creation at +199K, significantly below the +422K consensus view.  In addition, the workweek contracted as did factory overtime.  But, markets didn’t react much to this.  Instead, because the Labor Force Participation Rate (LFPR) continued well below its pre-pandemic level and didn’t budge […]

Outlook: 2022 Growth Will Likely Disappoint

After years of trying to move inflation higher (the elusive 2% inflation goal), the Fed’s ultra-easy QE policies along with plenty of help from the fiscal side (“helicopter” money, and outsized fiscal deficits) have more than accomplished the goal.  Overshoot is an understatement!  The financial media tells us every day that inflation is at a […]

Against All Odds – Equities at Nosebleed Valuations in 2022

It appears that the Santa Claus rally did arrive and right on time spurred on by the continued hope that the Democrats could still save Biden’s Build Back Better $2+ trillion spending plan (more government stimulus) and the emerging view that the omicron variant of Covid produces milder symptoms and fewer hospitalizations/deaths than originally feared […]

Fed Policy at a Critical Juncture

Fed Policy at a Critical Juncture A Policy Misstep Likely Spells Trouble Despite the rise in the CPI to a 39 year high, as reported on Friday, the S&P 500 closed at a record high.  At 6.8% Y/Y (+0.8% M/M), annual inflation rose at the fastest pace since 1982.  Core inflation (ex-food and energy) rose […]

‘Disappointing’ Employment Data: A Look Beneath The Hood

Disappointing employment data

A Tale of Two Surveys On Friday, markets were disappointed by the “meager” +210K (seasonally adjusted (SA)) headline Payroll Report (The “Establishment Survey”). The consensus expectation was for more than +570K with the lowest survey participant at +375K. Remember that the BLS adds a lump of more than +100K to the actual survey results each month (the […]

Apparently Money Really Does Grow On Trees!

Distortions from March’s helicopter money drop continue to cloud the forecast horizon. In nominal terms, income fell -13% M/M in April. This shouldn’t have been a surprise given that the free money raised March’s nominal income by 21%! Another distortion appeared in core PCE (Personal Consumption Expenditure) prices (the price index most watched by the Fed). It rose +0.7% […]