07 Apr PROJECTED GROWTH RATES ARE CONTINUING TO RISE
It appears as though projected global growth rates are rising every day. The IMF is now suggesting the global economy will expand by 6% this year, up from 5.5% forecasted in January. This would be the greatest global growth in four decades of data. The IMF also upgraded 2022 outlook to a 4.4% pace from 4.2%.
Continuing with the theme of stronger than expected growth, job creation is occurring at a pace much faster than even the most optimistic forecast had suggested. Many employers are reporting difficulties in filling positions and are resorting to bonuses or higher wages to attract talent.
According to the JOLT survey (Labor Department’s Job Openings and Labor Turnover Survey) rose to a two-year high. The number of people who voluntarily left their job was little changed as the quits rate held at 2.3%, only nominally lower than the record high quit rate achieved February 2019.
Economics 101 states inflation will rise in today’s environment, an expectation that is being recognized in several forward-looking indicators. The question at hand is that these expectations are considerably lower than where inflation should be in like situations.
Against the above backdrop, several bulge bracket firms are suggesting the 10-year will spike to over 2.25% which will in turn usher in another wave of equity volatility given that some indices are priced at levels last experienced in 1929 and early 2000.
Bank America suggests the above is the biggest risk to the market, a risk that may not be offset by an acceleration of earnings in some sectors that have already front loaded five or six years of revenue growth into one year.
Markets were mixed yesterday. The NASDAQ essentially unchanged and the Dow insignificantly lower. Treasuries rallied about a ½ point
Last night the foreign markets were mixed. London was up 0.78%, Paris up 0.07% and Frankfurt down 0.14%. China was down 0.10%, Japan up 0.12% and Hang Seng down 0.91%.
The Dow should and the NASDAQ should open flat. JP Morgan’s Jamie Dimon made some optimistic statements stating the post pandemic “boom” can last at least two years The 10-year is off 1/32 to yield 1.67%.