Why Not 50? Raising rates by 50 bps this early in the cycle isn’t going to make monetary policy tight. Right now, nominal GDP (real GDP growth plus inflation) is up 4.8% in the past year and up at a 4.4% annual rate in the past two years, well above the current federal funds target of 1.625%. The 10-year Treasury yield is about 145 bps above the funds rate. Meanwhile, the banking system is chock full of excess reserves and a record amount of capital. Congress and executive agencies are moving to undo some of the excess regulations on the banking system, there are no major bubbles in the financial system, and corporate balance sheets are in fantastic shape.
We’ve been cheering for quite a while now…Stock market bulls got something to cheer about last week.
The US labor market has rarely been stronger. Recent figures from the Labor Department show US businesses had a total of 6.550 million job openings in March versus 6.585 million people who were unemployed. That’s a gap of only 35,000 workers… the negligible gap between the number of job openings and the number of unemployed who are pursuing work shows that the demand for labor is intense.
Don’t Compare Stocks to GDP. The real issue here is that investors should care little about GDP. No one buys shares of GDP. Investors buy shares of companies, and profits are proof that productivity is strong in the private sector. Government distorts the picture, showing both a secular stagnation and “bubble” that don’t really exist.
California Dream’in, or is it a Nightmare? From 2006 to 2016 over a million more people moved out of California than moved in.
Some facts extrapolated to an extreme! OK, here’s another person’s opinion about the stock market returns over the last few years and why they think that may be coming to an end. I’ve italicized their perspective and my opinions are NOT italicized.