Saturday, November 23, 2024
ON THE FIRST DAY OF Financial Advisor school everyone learns that falling interest rates mean a weakening economy.
That’s not really true. On the first day of financial advisor school, they duct tape your phone to your hand and your body to your chair and don’t let you leave your desk until you’ve made one hundred telephone calls telling people how you’re going to make them rich. It’s called the “Smile and Dial Theory of Financial Markets.”
Anyway, on the second day you learn that when the economy is slowing, the demand for dollars, usually in the form of loans, likewise, slows. And, of course, all else being equal, reduced demand means a decrease in price and the price of dollars is measured in interest rates.
Of course, all else is never equal as the government and central bank constantly meddle in and interfere with the bond market. Indeed, they seem to do little else.
That said, interest rates have fallen, somewhat dramatically, for the last six straight days. During that time, the yield on the 20-year treasury has fallen from a high of 4.848% on May 30th, to a low of 4.516% yesterday, a significant move in the treasury market.
And none of this came as a result of a Fed Meeting, or a press conference, or a Dot Plot or a speech from a Fed President. To an extraordinary degree, over the last week, all else has remained equal.
There is no doubt that the economy is slowing. It seems to us that the deceleration has been accelerating in recent weeks.
And that’s not a big deal, unemployment is still low, economic growth isn’t great but it’s within the range it’s been in over the last twenty years or so and, of course, the stock market is at or near all-time highs.
It’s not a big deal unless inflation refuses to get down below the Fed’s target, or if it were to accelerate.
We get our next look at inflation on Wednesday of next week when the Consumer Price Index complex rolls out. Expectations are that prices increased last month at a 3.6% annual rate. We shall see.
Stocks rallied to new highs on higher volume as advancers led decliners on the session.
As we stated, rates continued their downward trajectory yesterday.
The ADP Nonfarm Payroll Report was released yesterday, before the opening bell and, like much of the data out of the labor market in recent months, it disappointed.
Expectations were that 173,000 jobs were created during the month of May. 152,000 is what we got, and that is the lowest number of new jobs in four months, well below the average of the last couple of years or so and follows on the heels of the Tuesdays disappointing job openings report.
It’s Thursday, so we get another look inside the labor market as Initial and Continuing Claims for Unemployment are released. Expectations are they they mostly held steady versus last weeks numbers.
Tomorrow, we get the jobs report, which includes
Everyone here at the Ministry of Truth will be gathered around the telescreens before scurrying to our cubicles to read, listen, watch analyze and report it all, for you, here on the Buzz!
