With a jobs report coming in much hotter than expected market volatility is likely to continue
With a jobs report coming in much hotter than expected market volatility is likely to continue
With jobs numbers coming in much higher than anticipated, and that too much higher, we think the market volatility is likely to continue. Given that employment is higher than anticipated that leads to consumer to have higher wages which supports their buying habits.
Buying habits increasing in today’s economy is not very good news to the average consumer because it leads to much higher levels of inflation. To tame that inflation is higher interest rates and today’s jobs report has set the stage for another 50 – 75bps rate increase for the next Fed meeting later this month in July.
Markets typically do not like high interest rates, but higher rates is the anecdote to our inflationary problems. Free money that the Fed was printing is gone also which, which was one of our many causes of record high inflation.
Higher interest rates will slow the economy, but worthy of a note is that the Federal Reserve does not have a great track record of taming inflation without collateral damage to our economy. Yes we are talking about the “R” word, recession.
The reason goods new right now about the economy, higher wages, and more people working is that it leads to the Feds resolve of raising rates. The higher the rates the more likely a recession is likely. Given all this we are seeing a scenario of higher market volatility to continue.
