The puzzle is compounded by the strength in the job market, which continues despite layoffs at high-profile compa-nies. FedEx is the latest, announcing Wednesday that it will shrink its manager workforce by 10%. The Labor Department’s monthly JOLTS survey of job openings for December, also released this week, increased to 11 million, believe it or not. This is remarkable after a year or so of interest-rate increases.
El Arian seems to think those strong employment numbers will cause inflation to be ‘sticky’ in the 3 or 4 percent range. That could force the Fed to choose between having to keep rates higher longer than the markets like or accept inflation in a range above two percent. We investors have to chart those waters with a fuzzy crystal ball.
January’s blowout jobs report, posted Friday morning, showed nonfarm payrolls rose by nearly three times as much as economists had been expecting.
No, the economy isn’t slowing.
No, the Fed’s big campaign of interest-rate hikes all last year hasn’t shown up yet on Main Street.
And no, there’s no reason to expect rate cuts any time soon.
Oh dear. A lot of investors just learned again, the hard way, the old rule: When someone tries to tell you something about themselves, listen.
On Wednesday afternoon Federal Reserve Chairman Jerome Powell said over and over again: We’re not done raising interest rates. We’re not finished. We’re not expecting to cut rates any time soon. Barring a complete surprise, we’re not expecting to start cutting rates this year.We would much rather raise rates too high and keep them high for too long than start cutting them a moment too soon.
When the Fed chairman says he’s going to keep rates higher for longer, who are you gonna believe: Wall Street or your own ears?
“Don’t fight the FED.” I remember Marty Zweig said those words on the Louis Rukeyser PBS stock tv show in the 1970’s.
Investors are not heeding that advice.
And some investors and economists say the central bank will lower rates by year-end in the face of a weak economy.
Investors do not believe Powell will continue to raise interest rates. Personally I believe Powell is looking toward his legacy. That he will keep rising rates. He wants to be known as the second coming of Volcker.
I dunno. But I do not believe we only have 2 more small interest rate hikes in our future. It would seem the US economy has become a juggernaut. Reining it in will take quite a bit more than that to rein it in. It will be interesting to see what the inflation rate is. Can a surging economy have low inflation?