By: Jeff Anderson
|Close||Weekly return||YTD return|
|US Treasury 10yr Yield||3.2%|
Source: Wall St. Journal
Investors are engaged in a game of tug-of-war. What are they fighting about? Fear. Inflation fears and recession fears. Each piece of economic data seems like the bell starting the next round. Employment data for August was released Friday, showing 315,000 jobs being added, down from a revised 526,000 jobs in July. The labor participation rate ticked higher (meaning more people decided to get a job or committed to looking for one). So, slower job growth and more people looking for work means less wage pressures and possibly a slowing economy and therefore lower inflation expectations. Or inflation is eating away everyone’s wallet forcing them to go look for work because everything costs more, and they can’t keep going on like that. So, good economic data means the Fed will have to keep raising interest rates because good economic data means demand hasn’t’ softened and it makes the Fed’s job harder to combat inflation. Bad economic data means we could be heading into a recession which will cause inflation to fall, and the Fed will be able to stop hiking rates and even consider cutting rates at some point next year.
Are you confused yet? Bad economic data is good for interest rates (& potentially the markets) and good economic data is bad for interest rates and markets) It’s a bizarro world we are living in right now.
So, what are we supposed to make of all this? First. Take a breath. Second, consider the future. We have had recessions at the end of every economic cycle, and we are batting 1,000 when it comes to surviving them. The US economy has never fallen into a recession and stayed there. Recessions aren’t black holes. They are part of the economic cycle. Think of recessions like trips to the dentist. No one likes those appointments, but they are necessary.
It Might be Time to take that European Vacation:
The Euro is less expensive than the US Dollar for the first time since 2002. Well, it’s barely less. 0.999 to be exact. It was above 1.5 in 2008. Europe is suffering from sluggish economic growth, partly due to extremely high energy prices brought on by the Russian-Ukraine conflict. The continent is heavily dependent on Russian gas. Tight supplies have driven costs through the roof, dampening consumer demand and business’ ability to remain profitable. And for that, Europe can be enjoyed on the cheap.
While you’re there, you may consider buying some real estate. Depressed prices coupled with a strong US dollar make for some great deals on apartments in Paris! “Laetitia Laurent, a South Florida interior designer, has long had her heart set on a Parisian pied-à-terre. This summer, with the dollar soaring and Parisian real-estate prices holding steady, she took the leap. The 42-year-old, who lives in Boca Raton, paid 758,000 euros, or $758,606, for a 460-square-foot, one-bedroom in the Golden Triangle—the prime residential and commercial area between the Seine and the Champs-Élysées, in the French capital’s pricey 8th arrondissement. Ms. Laurent said, “I had been looking for a place for a long time.” (1)