The consensus of economists
The jobs report on Friday was a bit of a shocker! Much lower number of new jobs than expected with previous months estimates reduced as well. Is the Bureau of Labor Statistics making numbers up. No!!!! Reports are always adjusted, and a more accurate indicator is looking at trends over 6 months. We recently had a GDP growth quarterly report of just under 3% and economic growth persists. Additionally, wages are increasing greater than inflation as reported this week with the inflation rate nearing the Fed target of 2%. Gas prices dropped nationally, and consumer confidence is increasing! Americans still seem unhappy.
The dominant factor that rises to the top is inflation. Inflation is really insidious it seems. That would ring true if any of you lived through inflation during the Carter years with the first oil shock. It took Americans years to recover from the rampant inflation of those years. The Carter years had the worst economy because not only was inflation extreme but stagflation-inflation with no economic growth-is punishing. Fortunately, that is not what is happening now even though there are still some fears of the economy worsening as America's feelings about the economy are also colored by the nasty political season. Economists have concern about the economy going forward based on the potential results of the election. No matter who wins, the deficit grows. Economists have serious concerns about some of Donald Trump's policies. Even Elon Musk, a supporter of Donald Trump, says expect economic chaos with markets falling and interest rates increasing over the first six months but over the long-term economic benefits.
The consensus of economists is that Trump wins in increasing inflation and economic disruption with threatened deportations impacting the economy creating worker shortages pushing wages higher if you can find workers and tariffs causing prices to rise. In the latest quarterly reports publicly, traded companies are mentioning the intention to pass on any tariffs to consumers.
Even with all the uncertainty around the election there are no reasons to change portfolios designed to weather all sports of storms. Markets react more to economic data. The latest economic data point to a likely ΒΌ point reduction in the Fed funds rate. The bond market is reflecting the stronger than expected economy by rising 2 year and 10-year treasury rates therefore the yield curve normalizing.
