Tougher/tighter financial conditions and an aggressive Fed still playing from behind with regards to rates and inflation are purposefully destroying economic demand. Last week US housing data looked softer. This week demand destruction is being felt in the labor market. Just released job openings data (JOLTS) looks soft. The summer of demand destruction continues.
It’s close to a 50/50 bet as to whether the Fed hikes 50bps or 75bps in September. Demand is weakening, inflation is coming down on many fronts, and yields are now 50-70bps lower than they were a month ago. That’s all natural and part of a rate hiking cycle. The magic word the market is waiting to hear is “pause” out of the mouth of the Fed – I think that happens after the first frost this fall.
Chief Investment Officer
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