Quote:
Originally Posted by CoachKandSportsguy
former finance guy to the rescue.
1) The current rates of inflation have trended down and is close or the core is at or below the fed's target rate of 2%. Primary goal accomplished! 
2) the labor market is much weaker than the headline numbers show. Why is that statement appear to be true? Because the annual true up adjustment was down about 700,000 jobs or so, which is about 70K per month overstated Likewise the month following the monthly inithialreading, true up adjustments are all negative / down as well. So for what every reporting source is being used for the initial monthly reading, is toohigh, and so the market is weaker in reality, than the BLS is portraying
3) The Sahm rule is right at the labor recession threshold, meaning that any further weakness in the labor market is signal a recession is imminent.
4) Powell is a being a bit more political than he would ever admit, but if there was ever a time to avoid any labor recessions or numbers or indicators showing that a recession is imminent, now is the time to reduce rates to avoid any negative economic press prior to the election.
Does that work for you? |
You are correct on all 4 points. However, only the RATE of inflation (how fast prices are going up) have slowed down. Actual prices? Maybe they dropped a little, but everything is still over 2x 2021 prices. What's scary is Crude is back to 2021 prices, but gas is not. What's going to happen on the next wave.... And you can bet we get it. With rate cuts and the government spending money like a drunken sailor, it's sure to happen.
We should also point out (not always, but many times) rate cuts are overall bearish for the stock market. See 2007. The market topped a few weeks later after they started cuts on exactly the same day back then.
The political landscape looks like 1968, so does the stock market. It topped in November back then. Maybe we get another trip up into Q4 2025, but too soon to tell. I need to see where this leg tops. S&P500 between 5900 & 6200, we might be done for awhile. Lower before a drop & my scenario into 2025 plays out.
As for why the indices are up so high -- Well if prices have 2x & 3x for everything, it makes sense an index of 30 or 500 stocks also would cost more to own.
Addressing point #2 you made -- Yeah, and that's part of what leads to a recession.
The BLS has revised everything. How they report CPI, weighting of individual components, and of course as you know, somehow managed to sneak in a revision of 813,000 jobs lost which no one will pay attention to until the election is over.