End of the game Traders on the floor of the New York Stock Exchange
It's been a long and arduous journey, but the current US monetary tightening
cycle is by all accounts at its peak, with a September interest-rate cut by the
Federal Reserve a forgone conclusion. But softer economic data caused some on
Wall Street and elsewhere to panic Aug. 5, sending markets on a wild ride that
less excitable observers noted was largely unnecessary. Disappointing labor data
caused markets to plummet on Monday, but by Thursday positive labor data sent
nervy investors back to their terminals. Now, all eyes turn to next week's
inflation print to handicap the central bank's effort to achieve a soft landing
that seems oh-so-close.
Traders on the floor of the New York Stock Exchange on Aug. 5 Photographer: Spencer Platt/Getty Images North America
And while repeated, often fevered predictions of a downturn have fallen flat for over two years now, tightening conditions attendant to the Fed's effort to cool the economy haven't been painless. The real estate market is plagued by low-inventory and soaring borrowing costs while consumers have been dogged by a spike in prices (some would say gouging) for everything from cars to eggs. As a whole (though not among tech firms that have terminated tens of thousands), businesses scarred by pandemic-era worker shortages have so far largely avoided firings and instead pulled back on hiring, trimmed job openings and reduced hours. In some locations, a surge in migration—furious opposition to which is the central component of Donald Trump's presidential campaign—has helped ease deep labor shortfalls and thus helped the Fed control inflation. How does all of this play out in an election year? Whether the next three months show Fed Chair Jerome Powell continuing to cool the economy without doing damage may be determinative.
Traders on the floor of the New York Stock Exchange on Aug. 5 Photographer: Spencer Platt/Getty Images North America
And while repeated, often fevered predictions of a downturn have fallen flat for over two years now, tightening conditions attendant to the Fed's effort to cool the economy haven't been painless. The real estate market is plagued by low-inventory and soaring borrowing costs while consumers have been dogged by a spike in prices (some would say gouging) for everything from cars to eggs. As a whole (though not among tech firms that have terminated tens of thousands), businesses scarred by pandemic-era worker shortages have so far largely avoided firings and instead pulled back on hiring, trimmed job openings and reduced hours. In some locations, a surge in migration—furious opposition to which is the central component of Donald Trump's presidential campaign—has helped ease deep labor shortfalls and thus helped the Fed control inflation. How does all of this play out in an election year? Whether the next three months show Fed Chair Jerome Powell continuing to cool the economy without doing damage may be determinative.
No comments