10 Jun TWO DAY FED MEETING CONCLUDES TODAY
The St. Louis Fed stated yesterday “the US labor market has continued to heal at a relatively rapid rate through early June, making up almost half of the decline that was recorded in Mid-April.” The Bank uses real time daily data to make its conclusions.
The two-day Fed meeting ends today. What comments will the Committee make regarding May’s unexpectedly gain in payrolls?
Goldman offered a cautionary note about the Fed’s intentions to tolerate an above target inflation rate stating that such could impinge consumer’s purchasing power. Goldman further opined there is a possibility of both demand pull (commodity based inflation) and cost push inflation (labor inflation), the result of inventory weakness if both jobs and the economy continues to surprise on the upside.
This outlook is in direct contradiction the deflationary narrative that most espouse. As noted several times, Goldman is suggesting a third quarter growth rate of 25%. It has not publicly forecasted a nominal GDP growth rate.
Is the Bank suggesting nominal GDP could be over 35%? Wow! This would be another black swan event, defined as something that only occurs 0.0001% of the time…aka five standard deviations from the mean.
Commenting about yesterday’s market activity, the Dow slipped about 1% on valuation and economic concerns while the NASDAQ added about 0.50%.
Last night the foreign markets were down. London was down 0.14%, Paris down 0.33% and Frankfurt down 0.52%. China was down 0.42%, Japan up 0.15% and Hang Sang down 0.03%.
The Dow should open nominally lower as the OECD undercut economic optimism. Moreover several “experts” are warning coronavirus is still potentially a major issue. Additionally, several influential market pundits have offered stark warnings about the myopicy of market leadership, stating that such is massively top heavy and unsustainable. The 10-year up 8/32 to yield 0.80%.