TSP Smart: Market having a Cow

Here’s the chart that the markets are having a cow over…

As my readers know, good economic news is bad financial market news. And this looks like great economic news. For those confused, the stronger the economy, the higher interest rates need to go and the further tightening of “financial” conditions that will be needed to slow inflation.

The Atlanta Fed model is not the official GDP, but it is a model that updates as every new piece of GDP component is reported. And that 5.8% GDP growth is causing a stir. Note that even the Blue Chip consensus sees the economy pulling away from the desired recession.

While many analyst out there are befuddled, I shrug my shoulders and say it’s the “lower statistical inflation”. Inflation stats are bottoming and GDP is reported as nominal GDP minus inflation. So there is less “minus” today.

No worries, by the end of the year “statistical inflation” will be higher and nominal GDP will be lower and everyone will again be happy that we are on the cusp of a GDP model recession.

Except will we?

We might be, but unemployment will still be low because of the reduction of 800,000 people in the working age every year for the next decade and this will keep pressure on wage inflation.

And have you seen what the UAW union is asking for… LOL.

I think they threw in the 32 hour work week and defined pension as throw aways, but that 45% wage growth in 4 years is not unfair after decades of wage suppression, record corporate profits, record CEO pay packages, 10% inflation last year and 6% for 3 more years. If you do the math on inflation 38% higher wages is breaking even. UPS got something like this already and United Airline pilots are getting a 40% pay raise.

Sure, inflation is coming down to 2% soon. Sure.

The market has been in denial. It may begin to wake up soon. Don’t get in its way.

Invest Smart,

Michael Bond

TSP Smart

Categories: Perspectives

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