Hopes for Lower Interest Rates Fade as Inflation Doesn’t. It’s Bad News for Bonds and Stocks.
In the week ahead, the usual first-Friday-of-the-month frenzy over the employment report—and its implications for interest rates—won’t occur. Instead, by a quirk of the calendar, the report will arrive on March 10, leaving markets on edge for another week.
Investors will have to wait to find out if January’s boom-like data on jobs and retail sales, plus high inflation readings, were artifacts of abnormal weather that magnified seasonal adjustments for the dead of winter. The Federal Reserve’s Open Market Committee will have most of the pertinent numbers in hand for its March 21-22 meeting, unlike at the last confab ended on Feb. 1, after which the world was shocked by the strong January tallies.
For now, weekly new claims for unemployment insurance, a component of the index of leading indicators, continue to run below 200,000, a sign of a still-strong labor market. That counts more than headlines of layoffs from tech outfits, many of which went on hiring sprees when money was cheap or nearly free to them. Those days obviously are over.
What makes the situation for stocks and other risk assets unfavorable isn’t just the possibility that interest rates may have further to rise. It’s also that this is looming at the same time the economy is losing steam, something many investors haven’t experienced.
.jpg)
