Jackson Dreiling on LinkedIn: Another Challenge for the Fed to Contend With (2024)

Abstract: Presidente Jay #Powell: "As I noted earlier, nearly all Committee participants expect that it will be appropriate to #raise interest rates somewhat further by the #endoftheyear. But at this meeting, considering how far and how fast we have moved, we judged it #prudent to hold the target range steady to allow the Committee to assess additional information and its implications for monetary policy.As I noted earlier, since early last year, we have raised our policy rate by 5 percentage points. We have been seeing the effects of our policy tightening on demand in the most interestrate-sensitive sectors of the economy, especially housing and investment. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. The #economy is facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The #labormarket remains very tight. Over the past three months, payroll job gains averaged a robust 283 thousand jobs per month. The unemployment rate moved up but remained low in May, at 3.7 percent. There are some signs that supply and demand in the labor market are coming into better balance. The labor force participation rate has moved up in recent months, particularly for individuals aged 25 to 54 years. Nominal wage growth has shown signs of easing, and job vacancies have declined so far this year. https://lnkd.in/d9XrMWCx

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Each week, a member of our Investment team delves into the ever-evolving financial landscape.This week, our Family Office AnalystNehemiah Whitediscusses market trends and the surprising turn of events in the opening trading week of 2024 >>Starting as we mean to go on?Investors hoping that markets would pick up where they left off in 2023 have been frustrated with the opening trading week of 2024. A reversal of the well cited, but perhaps outdated, ‘January Effect’ has taken place as we cross over into the New Year. The January Effect is a seasonal phenomenon in financial markets where stock prices have a tendency to rise in the first month of the year. This is usually attributed to year-end tax loss harvesting which suppresses stock prices in December, resulting in investors purchasing these securities at lower prices, driving the price back up through January. Whilst a potential source of arbitrage in the early-to-mid-20th century, it is widely accepted that a meaningful relationship between the opening month of the year and consistent returns no longer exists...Read more here > > https://lnkd.in/eAPCJDw3#JanuaryEffect #MarketTrends #FederalReserve #InterestRates #EconomicOutlook #MarketExpectations

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The reality check for markets came on Thursday, when data from US payroll processing firm ADP indicated that 497,000 private sector jobs were added in June, more than twice the consensus estimate. The news stunned Wall Street. While the strength of the US labour market is likely to push out the likelihood of recession in the US, it also appears to nail on more aggressive interest rate rises by the Federal Reserve to combat what it termed “unacceptably high inflation” and quash any hopes of a rate cut during 2023.Wall Street suffered its biggest one-day fall since May, while the FTSE 100 fell to its lowest closing level in eight months. The two-year US Treasury yield hit a 16-year high in response to the news.

Rethinking Federal Reserve Policy in a Post-Covid World....it is clear that we need a different strategy from the Federal Reserve. One alternative is to directly target corporate profits. Instead of raising interest rates, the Fed could implement policies to reduce excessive corporate profits...or target companies for higher interest rates based on profitability. By redirecting these profits, we could invest more in employees' wellbeing, offer fair wages, and foster work environments that value employees' contributions beyond mere financial metrics. #interestrates #work #wellbeing #covid #strategy #inflation#fed#labor#cost#wageinflation#wage#stockmarkethttps://lnkd.in/dhTH77uZ

📰 Implications of Steady Wage Growth on Federal Reserve PoliciesThe market displayed a mixed performance with caution as market participants digested the potential for Federal Reserve rate hikes and the implications of June's jobs report. All eyes are now focused on the forthcoming CPI report, expected to be a significant determinant for future interest rates and overall market direction.Full article https://bit.ly/3JIMVbe

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More than a year after the Federal Reserve beganrapidly raising interest ratesto tame inflation, the hallmarks of a widely expected recession remain elusive. Employers arehiring aggressively, consumers are spending freely, the stock market is rebounding and thehousing marketappears to be stabilizing—the most recent evidence that the Fed’s efforts have yet to significantly weaken the economy. Instead, the lingering effects of the pandemic have left consumers and employers still playing catch-up. That momentum could prove self-sustaining.Americans are splurgingon the activities they skipped during pandemic lockdowns, such as travel, concerts and dining out. Businesses are staffing up to satisfy the pent-up demand. Government policies in response to the pandemic—low interest rates and trillions of dollars in financial assistance—left consumers and businesses with lots of money and cheap debt. The same inflation that so worries the Fed translates into higher wages and profits, fueling spending.Many economists expect the Fed’s rate increases to cool the economy and price pressures over time, triggeringa recession later this year. So far, however, the data keep coming inhotter than forecast.Job gains,in particular, remain robust, pumping more money into Americans’ wallets. Payrolls grew by a surprisingly large 339,000 in May, and the increases for the preceding two months were higher than initially estimated, the Labor Department said Friday. “I don’t think there’s any chance we’re in a recession,”Justin Wolfers, professor of public policy and economics at the University of Michigan, told The WSJ.The National Bureau of Economic Research, an academic research group and the official arbiter of U.S. recessions, analyzes a slew of economic data to help determine whether the economy is in a recession. Most of those indicators look healthy, Wolfers said.Across the economy,job openings increased to 10.1 millionin April from 9.7 million in March, far exceeding the 5.7 million unemployed Americans that month. The mismatch between job opportunities and job seekers continuesto spur wage growth. Average hourly earnings grew a solid 4.3% in May from a year earlier, similar to annual gains in March and April.The job market could stay tight, largely because millions of former workers near retirement age have dropped out of the labor force since the pandemic began. The share of Americans age 16 and older working or seeking a job held steady last month at 62.6%.Americans have about $500 billion in so-called excess savings—the amount above what would be expected had prepandemic trends persisted, according toa May reportfrom the Federal Reserve Bank of San Francisco. That allows them to shell out forsummer travel, concert tickets and cruises despite rising prices—and enabling companies to keep raising them.

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No change as expected. Nothing really new except that they acknowledge strong growth and strong wage gains versus September, effectively upgrading their economic assessment. This is the 3rd time they upgrade their view on growth. Our view is unchanged: we are due for a long pause. High rates is the new normal.

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The #BankofEngland left rates unchanged and Andrew Bailey said he doesn’t expect meaningful growth before 2025.Rates will remain high for an extended period given the elevated level of #inflation.But today is the first Friday of the month - #nonfarmFriday - so we’re having the SWEEPSTAKE!The #Fed voted to pause and market sentiment is leaning towards rates having peaked, but #Powell is still trying to persuade the market that another hike is possible.Today’s #nonfarmpayrolls data may add to that debate, where another bumper number could tip the balance towards a final #ratehike at the December meeting. Forecast is for 180k new jobs, after 336k beat forecasts for #TeamOver last time out. JOLT job opening confirmed plenty of new job opportunities are out there and the ADP private sector may have missed forecast, but 113k new jobs was up from the 89k seen last month. I’m feeling pretty bullish.I’m in it to win it at 225k for #TeamOverGood luck to you and game on!#Finance #FxPlew #news

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