Anthony Chan
Anthony Chan
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The best way to describe this report is 'holy cow,' ... This is a great report. We have Alan Greenspan a little bit worried about inflation and certainly the financial markets will realize that those worries certainly continue to prove to be unfounded.
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He not only was articulate in his views, but justified his views without making financial markets balk. He was impressive, maybe not as impressive as Greenspan, but Greenspan had 18 years to practice.
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I think that if the Fed goes back to normal language about 'measured pace' (of rate hikes), it becomes a secondary story, ... It is only becoming a big story because of the uncertainty about what they were going to do. The equity markets will be looking for language here again. If it talks too harshly about inflationary pressures, it could be unfriendly for stocks.
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I think the markets probably overreacted when the Federal Reserve first moved toward a neutral operating directive. When Alan Greenspan spoke this time, I think the reality set in and that is, yes, the central bank has a neutral directive, but it's more like an ultra-right (hawkish) form of neutral directive. ... Any time they get an excuse to raise rates, they're going to take it.
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I think the risk is the downside, not the upside, ... I think the markets are fairly nervous about the prospects for growth. They're going to be dissecting the number. If we have slower than expected consumer spending and stronger than expected inventory growth, that's not going to bode well for the next quarter or so.
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I think the big jump in Japan gives a nice tail wind to the equity markets this morning.
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More rate cuts may not be forthcoming, but the Fed is also not likely to start raising rates as quickly as financial markets expect.
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International investing offers the opportunity for diversification. What you want in a diverse portfolio is the ability to have some markets move differently from other markets. You get a much higher rate of return with lower risk.
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I think this is an important first step for the central bank. They didn't want to lower rates too aggressively for fear of sending a signal to the markets that they thought things were completely falling apart.
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Even though I don't think one number is going to change the Federal Reserve's mind, the markets react to data as it comes out and these numbers were not inflation friendly.
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As the equity markets react positively to this change, we get a bit of a positive wealth effect which in turn should induce higher consumer spending.
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The rise in the unemployment rate takes much of the sting away from the robust gain in payrolls from a monetary policy perspective. The big fear ahead of the release of this report was that labor markets were overheating.
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It really tells us the economy is healthy, and at the same time we don't see that labor markets are overheating at an accelerating pace.
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A declining deficit may be signaling a slight loss of economic growth momentum.