We are currently in a very difficult spot: soft data such as consumer confidence, leading indicators such as the stock market or the (inverted) yield curve, indicate we are entering into an economic recession. However, the labor market still shows some signs of strength, inflation is still persistently high, and even though markets are down significantly, #eps haven’t re-rated enough to point to a recession. Consequenlty, the #fed feels more comfortable justifying their tightening bias focusing on the second set of data, rather than the first, particularly on a Mid term election year, where gas prices and cost of living are the main issue for the average citizen. Today, US inflation for June will be published. If persistently high, it may push the #fomc on July 28th to hike 75 bps again, which may push the US economy to a recession.
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Source: Bloomberg
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