Goldilocks Vs The Bears
Let's investigate belief in Goldilocks vs belief in Bears.
John Rubino at DollarCollapse says A Bull Market For The History Books — Bear Market To Follow Shortly.
Why the current expansion/bull market has so long is open to debate. What’s undeniable, though, is the vast amount of malinvestment that has accumulated. The biggest example might be corporations borrowing hundreds of billions of dollars to buy back their stock at record high prices. See Record Buybacks at Worst Possible Time. If those equities subsequently fall by half in a future bear market, today’s buybacks will end up as an object lesson in corporate hubris.
Goldilocks Jobs Report
Liz Ann Sonders says All Right Now: Goldilocks Jobs Report Eases Inflation Fears.
A very strong jobs growth with benign wage pressures unleashed a strong day for the stock market.
Other than wage growth deceleration, the details of the report were quite healthy.
Tax reform can take some of the credit for stronger goods employment relative to services employment.
In the wake of the release of January’s jobs report—which saw a jump in average hourly earnings—I had our fearless cartoonist Charlos Gary create the visual below, with the headline “Goldilocks may be leaving the building.” Notice that the little bond bear has been awakened (as Schwab’s Kathy Jones has been detailing); but the equity bears are still tucked in their beds—albeit with the non-recession bear keeping a cautious eye on the situation.
Courtesy of last week’s February jobs report though, it looks like Goldilocks may have taken a step back into the building. For those not familiar with the analogy, an economy that’s operating “not too hot, but not too cold” is often referred to as a Goldilocks environment. We have been in such an environment as it relates to economic growth and wages/inflation for much of the current economic expansion.
Jeffrey Snider writing for Alhambra Investments write about the Return of The Perfect Payrolls.
Over the past two days, Chinese exports exploded, US payrolls bested 300k, and China’s CPI recorded the hottest inflation in 5 years. Globally synchronized growth?
It might be tempting to view this recent positive report cluster in that way, but, again, we’ve seen these before.
The other big problem with the current BLS figures for February 2018 is that +311k sounds impressive but it shouldn’t. It does only because the labor market is just that weak. What I mean by that is any reasonable standard for meaningful growth is so far above what we have become accustomed to. It’s not that the labor data is misleading on its face, it’s that the interpretations of them haven’t been re-calibrated properly for the last decade.