Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Jackson Hole Will Signal Hawkish Tone for Financial Markets

Stock-Markets / Financial Markets 2014 Aug 03, 2014 - 12:35 PM GMT

By: EconMatters

Stock-Markets

Jackson Hole Agenda

The annual Jackson Hole economic symposium, a three-day conference in Wyoming begins on Aug. 21 with the official topic of “Re-evaluating Labor Market Dynamics.” Sure, there will be debates from the Bullard camp who views that there isn`t near as much labor slack in the economy versus the Yellen camp who believes that the long-term unemployed will eventually come back to the economy once the job market tightens further. There will be interesting thoughts regarding the structural changes in the economy and how this effects full employment, and the mismatch between job requirements and candidate skillsets. There will be talk about wage inflation in the context of the largest addition of jobs since 1997 to the economy where even a bad employment number these days lands over the 200k a month level.


2nd QTR GDP 4%

But make no mistake the data this week finally has pushed the Fed`s hand, and they are going to have to raise rates by the first quarter of 2015. Even the employment bears, you know those Wall Street types who want more free money from their favorite central bank so they can continue this charade that is borrow everything you can and invest with anything that has a yield pulse, can no longer play the GDP and Inflation card. I know we are producing record jobs this year, but we had a negative 2.9% GDP in the first quarter and it was more than bad weather and an inventory overhang issue from robust 3rd and 4th quarters of 2013.

Well this week we finally put that argument to rest as the first look at second quarter GDP came in at a robust 4%, with the first quarter being revised up from a negative 2.9% to 2.1%, so the economy basically grew at a 2% rate for the first half of the year with one of the worst winters on record, and the working off of 2013 inventories. This bodes well since the US economy, being a highly consumer driven economy, really kicks into high gear the second half of the year. A lot of this is based upon the Fall Back to School Spending cycle, companies needing to spend budgeted money or lose it, Tax Spending, the Holiday Shopping Season, the ramp up of college and pro sports football season, and milder weather conditions in the bulk of the country. In short, 2014 will grow at a faster pace than 2013 when all is said and done!

Employment Cost Index 0.7%

The other interesting note this week in terms of data was on inflation where on Thursday The employment cost index (ECI) came out and showed a surge of 0.7 percent in the second quarter where pressure is evident in both the wages & salaries component, which jumped 0.6 percent in the quarter, and the benefits component which surged 1.0 percent. Furthermore, year-on-year rates all show significant acceleration and are near or above the general 2.0 percent policy threshold cited by the Federal Reserve. The total employment cost index is up 2.0 percent year-on-year vs 1.8 percent in the first quarter with wages & salaries at 1.8 percent, vs the first quarter's 1.6 percent, and benefits at 2.5 percent vs 2.1 percent.

So the CPI, PPI, and other inflation metrics in the various manufacturing and services reports are all signaling higher inflation it should be no surprise given a Fed Funds Rate between zero and 25 basis points since 2008, and now that the economy is actually producing jobs, and the labor market is tightening fast, that wage inflation is starting to perk up, and this is the next shoe to drop in the economic cycle.

The Fed is Behind the Curve

The Federal Reserve is already behind the curve, this is obvious as at no time in our history has the economy performed on this level with rates basically being held at ‘end of the world’ total meltdown levels! Sure Wall Street wants free money from Central Banks, this has been the easiest money making era of their lifetimes; now that rates will rise, they actually have to learn to differentiate between asset classes, companies, and investment strategies. This was what changed this week, these two important data points on GDP and Inflation put the nail in the ‘Free Money for Life’ coffin, and this sent shivers up the spine of financial markets!

Read More >>> Fed Trying to Warn The Bond Market

Market Turmoil

The musical chairs game has already started in the high yield credit markets, the primary dealers are already signaling to the bond market that they don`t want to hold this paper, expect bond funds to finally get the message like the stampeding elephants that they are, and equity markets to start modeling valuations with a normalized borrowing cost for capital as interest rates rise early in 2015.

Hawkish Speech Outlining Turn in Monetary Policy

Look for a speech on Friday August 22nd by Janet Yellen where she officially signals the end of the ‘recession era’ ultra-dovish monetary malaise of the last 7 years with a more hawkish tone to signal to financial markets that they better start finding their respective chairs before the low interest rate music stops playing entirely.

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2014 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

EconMatters Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in