Dear Reader,
Since it's a short week, I'll get straight to the point.
For a little over a year, the rapid economic recovery came with demand growth sharply outpace supply, causing inflation rates to rise.
However, supply has failed to catch up, which is why the Federal Reserve has been tightening monetary policy in its effort to bring down inflation by cooling demand.
While economic growth has indeed been slowing in recent months, high inflation persists.
And now we have an even more hawkish Fed putting even more pressure on the economy, and it's doing so by targeting the financial markets.
The big picture here is that since there seems to be nothing more important than getting inflation under control, bad economic news will be considered good news in that it should mean less pressure on prices.
And so in some twisted way, last week's gloomy economic news may explain why the stock market rallied a bit last week.
For now, we're still a long way from having accumulated the "clear and convincing" evidence of moderating inflation that the Fed is seeking out.
And so as investors, we should continue to manage expectations as the Fed continues to fight inflation by pressuring the financial markets.
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