The Trump Effect: Low Unemployment Makes Economy ‘as Good as it Gets’
$DIA, $SPY, $QQQ, $RUTX, $VXX
- Current economic conditions are “as good as it gets” for the Fed, a Key policymaker said Thursday.
Looking ahead, investors will receive the Employment Situation report for August Friday, the consensus expecting an increase of 187,000 in NFPs, an increase of 0.2% in average hourly earnings, and an unemployment rate of 3.9%, unchanged from July.
Businesses and the markets care about deregulation, and tax reform. And the chaotic picture of The Trump White House painted by anonymous reporting distracts from the president’s accomplishments
Savvy investors care about President Donald Trump’s policies that fuel and drive the US stock market North, they like his unconventional approach, he keeps promises, he gets results, that is known as The Trump Effect.
New York Federal Reserve bank President John Williams said steady inflation and low unemployment will allow the Fed to continue gradually raising rates.
“We can continue to be relatively patient and allow this economy to continue to grow,” Mr. Williams said at the University of Buffalo School of Management. There is “room to run” in the current recovery, he said, particularly with weak wage growth indicating some “slack” left in the labor market.
Mr. Williams also serves as a Fed Vice Chairman and has a permanent vote on the FOMC.
The FOMC meets ion 25-26 September and is expected to deliver its 3rd rate hike of the year as well as fresh economic and policy projections.
Mr. Williams said that in surveying risks ranging from stress in emerging markets to possible domestic instabilities, he regards this as a “goldilocks” moment. Inflation is near the Fed’s 2% target, the labor market is at or near full employment, and there is no sense that financial risks, whether at home or abroad, are particularly acute.
He specifically dismissed the concerns, noted by some of his colleagues, that the narrowing gap between long- and short-term interest rates could risk an “inversion” of the yield curve if the Fed keeps pushing short-term rates higher.
Inversions, in which short-term rates rise higher than those for long-term securities, are taken as a signal of market pessimism, and typically precede recessions.
Mr. Williams said that while he accepts that as a historic fact, “I don’t want to mechanically apply the math or the evidence from previous periods to this one.” He noted that it is the Fed’s trillions of dollars in bond holdings that might prevent long-term interest rates from rising.
An inverted yield curve “would not be something I would find worrisome on its own…I don’t see an inverted yield curve as being a deciding factor in terms of thinking about where we should go with policy.”
He also said that while asset prices are high, he viewed households and businesses as cautious in their spending, in contrast to the years before the financial crisis in which rising home values fueled consumption through the use of home equity loans.
Thursday, the major US stock market indexes finished at: DJIA +20.88 at 25995.87, NAS Comp -72.45 at 7922.75, S&P 500 -10.55 at 2877.79
Volume: Trade on the NYSE came in at 773-M/shares exchanged
- NAS Comp +14.8% YTD
- Russell 2000 +11.7% YTD
- S&P 500 +7.7% YTD
- DJIA +5.2% YTD
HeffX-LTN’s US Major Stock Market Indexes Technical Analysis