May be Next!
Fed’s restrictive monetary policy is seen less effective domestically whereas the unbridled fiscal expansion has been anchoring the economy. On the other hand, US monetary policy tightening negatively impacts rest of the world and US fiscal policy hardly crosses the shores.
So long this fiscal profligacy stays, you can’t expect US to slow down.
Despite what many headlines implied; strong jobs growth isn’t propelling US growth. The simple point is that there just aren't enough workers to fill all the jobs because nominal GDP has grown by $6.2 trillion, or 28.7%, since the end of Q1 2020. & number of employed workers has only increased by 1.5% over that same time.
It is no wonder why average hourly wages increased by 0.6% m/m in January, its fastest rate since March 2022, while rising by 4.5% y/y its fastest rate since September 2023.
So, CY 2024 could be marked by the trend of "maybe next meeting". Wherever the Fiscal taps are open, equities would stay well bid - borrowing the future... Don’t bark at the wrong Monetary tree.
About equities: Friday was only the second instance in 62 years when S&P rose by 1% on a day when there were 2 Loosers for every winner on NYSE - can you believe the other instance was interestingly on Black Monday -
Vujcic : need to ensure there aren’t any second-round effects on inflation from wages before cutting interest rates. German Trade Balance today is relevant.
Below 1.0793, gates open, for accelerated down move at least till 1.0480.
Over the weekend the talking heads were trying to prop up the dream. But Chinese equity markets however don't believe them anymore - history says " reined in" markets always meet their end tragically - could be one more instance?
Bailey warned price pressures could pick up again in second half - Pill emphasized need for sufficient evidence- below 1.2600 would target a test of 1.2524, 38.2% of the 2023 range.
January Services PMI 53.1 (prior 51.5)-
Fri range 146.25-148.58; no prizes for guessing the imminent direction - move over 149.17 see fast rise towards 151.93 where intervention is less likely to happen this time.