Macro trends are generally looking up, with the major banks passing their stress test, the labor market hopefully headed for a soft landing and inflation cooling. If the Fed can chill out & the mayors of the big cities can keep things sufficiently habitable to avoid a run on commercial real estate, the U.S. economy might just get back to the business of prosperity.
Commodity prices are finally coming down, but what about labor? The data suggests that employers are poised to get some relief at the same time employees continue to enjoy raises.
- Given the reality that the Fed’s rate policy continues to dictate stock market performance, investors remain focused on inflation cues that will prompt more stock-punishing rate hikes. Specifically, the Fed has been focused on the labor market which represents a key price catalyst in their opinion.
- Fortunately, hourly wage growth and job listing trends are beginning to moderate as indicated in the chart below.
- While we take Powell at his word that more rate hikes are forthcoming during 2H23, it is possible that more favorable news about moderating inflation could soften his stance. Indeed, this would be very good news for the market.