Markets were quietly volatile yesterday. There are ample cross currents. Is AI the panacea for deficits and the elixir for robust profits or will it crush the workforce and corporate balance sheets? Is Bit Coin a possible safe haven asset or is it an over owned risk asset? Are jobs plentiful or is the labor market on the edge of implosion? What about the strength of the economy and the rate of inflation and interest rates?
Depending upon on who or what you read, one can get validation to confirm one’s confirmation bias. There is no shortage of opinions, dogmatic statements that either this or that is going to happen.
Markets are people and people move markets. Legendary banker JP Morgan once commented that his most important and trusted board member was the clinical psychologist as he was one the one who had the most informed view of possible behavior.
Friday is the initial release of fourth quarter GDP and its ancillary price indices. Barring a significant surprise, the economy is expected to be “robust” based on the released data.
The economy has always been uneven and this is perhaps the first time that white collar jobs are feeling considerable economic stress for a myriad of reasons. Blame it on AI. Blame it on bloated mid management. Blame it the Republicans. Blame it on the Democrats.
Many are feeling angst from the incessant rise in taxes, health care and various insurances.
Home prices are up considerably therefore homeowners’ insurance is also up as it is more expensive to replace a house. Real estate taxes are up because values are up. Car insurance is also surging as the average price of a new car is $50,000 and a used car $20,000. And then there is health care which is completely dysfunctional and the bane to most in society.
The above are all large ticket items and create considerable angst in budgets resulting from their incessant increases over the last five years.
Leadership is largely lacking, leadership defined as unifying disparate groups versus today’s environment of increasing division. Many believe the country/the economy is walking into a economic crisis, the result of unending budget deficits, deficits that most politicians do not want to talk about or have only one solution—increase taxes.
Economics 101 dictates the more something costs the less people would own it. Taxes are no different.
Former NYC Mayor Bill De Blasio wanted to greatly increase taxes on cigarettes to “encourage smokers to stop smoking as it would be too expensive.”
In a crisis, leaders will emerge. Today we don’t know who they might be but they will emerge, leadership based upon finding common ground to work together.
Enough of the rant, reiterating equities were quietly volatile ending essentially unchanged. Short-dated Treasuries sold off nominally while the long end rallied causing a minor flattening of the curve.
What will happen today?
Last night the foreign markets were up. London was up 0.96%, Paris up 0.53% and Frankfurt up 0.89%. China was down 1.26%, Japan up 1.02% and Hang Seng up 0.52%.
Dow and NASDAQ futures are up 0.35% and 0.75%, respectively as AI fears are waning for the day. The 10-year is off 3/32 to yield 4.08%.
