A Good Story with Minor Imperfections
“If you don’t know where you are going, any road will get you there,” is a quote that’s oft misattributed to Lewis Carrol. The fact that there is ambiguity about who is behind this quote on ambiguity seems fitting. For our purposes today, the spirit of the quote is what we are after. We think it may help elucidate the strange and confusing world of fake money in which we all travel.
For example, the monetary policy outlook immediately following last month’s FOMC meeting was as clear as a flawless (FL grade) diamond. The principal message, if you recall, was that inflation was muted and the Fed, after suffering an overt beating from President Trump, would soon be shaving basis points off the federal funds rate. You could darn near take it to the bank.
Wall Street took the news and acted upon it with conviction. Investors piled into stocks and bonds without pausing to take a closer look for imperfections. Why worry when fortune favors the bold?
From June 19 through Wednesday July 3, everything held up according to plan. The S&P 500 rallied 2.5 percent to close at a new all-time high of 2,995. The yield on the 10-Year Treasury note, over this period, dropped 13 basis points, as mindless buyers positioned to front run the Fed.
But then, in the form of Friday’s job’s report, several feathers of imperfection were identified. According to the Bureau of Labor Statistics, the U.S. economy added 224,000 jobs in June. This far exceeded the consensus estimates of 160,000 new jobs. As this week began, doubt and hesitation crept into the market. What to make of it?
…click on the above link to read the rest of the article…