Jack Ablin
Jack Ablin
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The bond market is still behind the inflation curve. The inflation story continues to chip away at our economy and it doesn't seem to be getting any weaker.
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Confidence is slipping, manufacturing is slowing, and even with today's jobs report, the employment trend is still negative. The bet here is that the Federal Reserve will have to stop raising rates in order to keep the economy from sliding further.
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The tick up in oil prices hurts, but history has shown that interest rates have a much bigger impact on the stock market than oil. And looking at the ISM services number, you're seeing the kind of gradual, lazy improvement in the economy that's not going to really get rates going.
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People are taking some comfort in results and a feeling that the economy is getting better, but there's still some caution. We need to see more evidence of a sustainable recovery. We need companies to start seeing profits more through top-line growth than just cost-cutting measures.
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This lends some comfort to the situation. In spite of slight economic weakness, the Fed sees no need to change its strategy. It's also not going to shut down the economy too quickly.
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We have some very ugly numbers. You can argue that the ISM is still backward looking, and maybe even the jobless claims, but eventually we're going to need some evidence that the economy is improving. We had a lot of enthusiasm coming from earnings, but the news today is a little bit of a slap in the face that we're not out of the woods yet.
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I would not expect investors and traders to make any big bets ahead of the number tomorrow. It clues us in on growth in the economy but also inflation.
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In both fees and commissions, they're in good shape.
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Economists are expecting a gradual slowdown in economic growth paired with a slowdown in inflation. That will allow the Federal Reserve to wind up its rate-hiking campaign.
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I'm not convinced we're heading into a recession. But we will have a slow down.
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It's increasingly believed among participants that the Fed will skip the next meeting, and possibly one more by the end of the year.
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Any bad news can throw us, and the jobs report was perceived as bad news, seen as a sign that the recovery is fragile, but that's not necessarily true. In the last two recessions, a pickup in employment only happened a year after the recession had ended. So just because unemployment is higher doesn't mean we're not on track for a recovery.
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With light volume, we're going to bounce around like a ping-pong ball. I wouldn't take any moves this week as a clear indication of anything.
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What I worry about is that if the Fed continues to tighten, they could commit the same error they have done every time since 1980 and cause a financial crisis.