by Franklin J. Parker, CFA
This week we get data on the health of the labor market. The unemployment rate is expected to hold steady at 3.9%, with about 170,000 jobs created, while job openings are expected to fall a touch. Unemployment is obviously an important input into the economy, and figures much different than what are expected could easily push markets around.
Last week the big news was the revision to economic growth in the first quarter, which was lower than initially believed — certainly a concern. In addition, we also got a look at the Federal Reserve’s preferred measure of inflation which posted in-line with expectations (and markets rallied on the news).
Let’s Connect.
Overall, I am still cautious. Corporate earnings are lackluster, and the fundemental drivers of the economy (especially the consumer) are showing signs of faltering. However, this pre-recession phase is taking a long time to play out, and while markets aren’t exactly going to the moon, they are edging higher. Understanding what risks you can reasonably take is very important in this environment, but it also means that we probably shouldn’t be sitting on the sidelines. Exactly how all of this plays out for you and your portfolio is something we should discuss.
Chart of the Week
One of the strange things about the post-Covid economic cycle has been how strongly monetary policy (which is what the Federal Reserve controls) and fiscal policy (which is what the legislature/president controls) have been pulling in opposite directions. Fathom Consulting estimates that, despite the Federal Reserve’s dramatic increase in interest rates, overall policy is still pretty loose. This makes it difficult to pull down inflation, and also increases the likelihood that the economy runs too hot (which is “paid for” with a deeper recession).
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