As macroblog reminds us:
That second quarter of 2000 should remind us that it sometimes looks pretty sunny before the storm.
Now, If Only Gas Prices Could Start Dropping
1 hour ago
Monday, June 4, 2007
A Warning
I have become a bit more bullish of late. Consumer spending is increasing and it looks like business investment might be picking up. That being said, this chart is from macroblog.
As macroblog reminds us:
As macroblog reminds us:
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2 comments:
Some months ago on the other blog we frequent, you posted a diary concerning the conundrum of an inverted yield curve vs. a booming stock market, apparently giving off conflicting signals. I responded that both might be correct: the bond curve could be signalling a consumer recession, and the stock market signalling that corporate profits would sail right through.
While not totally correct (enough Marie Antoinettes are still shopping to keep the consumer out of outright recession), that appears to be what has happened.
Like you, I am turning more bullish on the economy for basically the same reasons. It might be well to pose the question: what are the stock and bond markets signalling now? I believe the bond market is giving an important signal now. Unlike 1985 and 1995, where the (not nearly so bad) inversion resolved toward lower short term rates, this inversion is resolving like 1999, towards higher long term rates.
So, (pending 1 more month's data on durable goods and factory orders) I am leaning towards a strong expansion of the economy in the next few quarters, I believe the big surprise will be the re-emergeance of CPI inflation. I pointed out in response to last month's CPI figures that measured on a 6 or 12 month basis, inflation was rising, and rising significantly, not declining.
And like 1999, I believe the Fed unde those circumstances will have almost no choice but to rasie rates again.
Sorry, the above comment was mine (accidentally hit "enter" too soon!)
I wanted to conclude by suggesting that this might be a propitious time to write another "what are the stock and bond markets telling us" diary at either your old or new gig.
Cheers.
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