With the caustic logic of the market especially its reaction to the Fed you can never be sure. The Fed shows that every sector in the economy is strong except energy.
"Most of the country is experiencing solid growth, with only the energy sector providing a drag, the Federal Reserve reported Wednesday."
"The Fed's Beige Book is released eight times a year and provides a snapshot of economic conditions in the Fed's 12 districts."
"Respondents in most sectors across Districts expected growth to continue at its recent pace, but the Kansas City report cited more mixed expectations," the report stated.
"Manufacturing activity was "mostly positive," though New York and Kansas City both reported declines. Retail sales "continued to expand" in most districts, while real estate reports "were mostly positive," according to the Fed. Wages were "up slightly in selected industries or occupations" but prices were "stable or up only slightly."
"However, several districts reported increasing wage pressures caused by labor market tightening," the report stated.
http://www.cnbc.com/2015/09/02/fed-beige-book-says-economic-activity-expanding-growth-expected-to-continue.html
Labor markets tightening? Which districts are that? That's why they want to raise rates? But the trouble is that if the economy is fine then this might give gist for raising rates-which might make the market selloff, thereby making good news bad news.
In any case, in the immediate aftermath the market rose on the move.
Meanwhile the prices coming down in the energy sector would seem to be good news for us at the pump but lowering oil prices have often been correlated with down moves in the stock market.
So again, apparently good news hasn't been good news at least for the equities market.
Economists and traders differ on a September hike:
"Economists generally believe the Fed is going to hike a quarter point later this month, through traders disagree. Traders at the CME are assigning just a 27 percent chance of a September move, with December's likelihood at 60 percent."
"The Fed bases its decisions not only on where things are today, but where they may go," said Carl Tannenbaum, chief economist at Northern Trust. "We really don't have a handle on how all of this Asian mess is going to come back and affect U.S. GDP growth. Unfortunately, while the Beige Book was encouraging I thought, it predates a lot of the turmoil we've seen coming out of Asia."
"Bond expert Bill Gross, who manages an unconstrained fund at Janus Capital, said earlier Thursday that the Fed likely will raise rates in September but then hold steady for a prolonged period of time."
But what is the big urge to raise rates once and then hold steady? Why then just not raise rates and hold steady? Is it just symbolism and if so to what end?
Gross' explanation is that ZIRP is somehow destroying the market pricing system.
"In his monthly letter to investors, Gross said the Fed's " September meeting language must be so careful, that 'one and done' represents an increasing possibility—at least for the next six months. The Fed is beginning to recognize that 6 years of zero bound interest rates have negative influences on the real economy—it destroys historical business models essential to capitalism such as pension funds, insurance companies, and the willingness to save money itself."
I have to give it to Sumner: his premise that the Fed wants to raise rates just so when they have to ease money again they can cut rates has some plausibility to it.
He has a new post on whether the Fed should raise rates here.
http://www.themoneyillusion.com/?p=30455#comments
"Most of the country is experiencing solid growth, with only the energy sector providing a drag, the Federal Reserve reported Wednesday."
"The Fed's Beige Book is released eight times a year and provides a snapshot of economic conditions in the Fed's 12 districts."
"Respondents in most sectors across Districts expected growth to continue at its recent pace, but the Kansas City report cited more mixed expectations," the report stated.
"Manufacturing activity was "mostly positive," though New York and Kansas City both reported declines. Retail sales "continued to expand" in most districts, while real estate reports "were mostly positive," according to the Fed. Wages were "up slightly in selected industries or occupations" but prices were "stable or up only slightly."
"However, several districts reported increasing wage pressures caused by labor market tightening," the report stated.
http://www.cnbc.com/2015/09/02/fed-beige-book-says-economic-activity-expanding-growth-expected-to-continue.html
Labor markets tightening? Which districts are that? That's why they want to raise rates? But the trouble is that if the economy is fine then this might give gist for raising rates-which might make the market selloff, thereby making good news bad news.
In any case, in the immediate aftermath the market rose on the move.
Meanwhile the prices coming down in the energy sector would seem to be good news for us at the pump but lowering oil prices have often been correlated with down moves in the stock market.
So again, apparently good news hasn't been good news at least for the equities market.
Economists and traders differ on a September hike:
"Economists generally believe the Fed is going to hike a quarter point later this month, through traders disagree. Traders at the CME are assigning just a 27 percent chance of a September move, with December's likelihood at 60 percent."
"The Fed bases its decisions not only on where things are today, but where they may go," said Carl Tannenbaum, chief economist at Northern Trust. "We really don't have a handle on how all of this Asian mess is going to come back and affect U.S. GDP growth. Unfortunately, while the Beige Book was encouraging I thought, it predates a lot of the turmoil we've seen coming out of Asia."
"Bond expert Bill Gross, who manages an unconstrained fund at Janus Capital, said earlier Thursday that the Fed likely will raise rates in September but then hold steady for a prolonged period of time."
But what is the big urge to raise rates once and then hold steady? Why then just not raise rates and hold steady? Is it just symbolism and if so to what end?
Gross' explanation is that ZIRP is somehow destroying the market pricing system.
"In his monthly letter to investors, Gross said the Fed's " September meeting language must be so careful, that 'one and done' represents an increasing possibility—at least for the next six months. The Fed is beginning to recognize that 6 years of zero bound interest rates have negative influences on the real economy—it destroys historical business models essential to capitalism such as pension funds, insurance companies, and the willingness to save money itself."
I have to give it to Sumner: his premise that the Fed wants to raise rates just so when they have to ease money again they can cut rates has some plausibility to it.
He has a new post on whether the Fed should raise rates here.
http://www.themoneyillusion.com/?p=30455#comments
Here's a piece at CNBC that argues of course the timing of the rate hike matters and that it's changed now with such market volatility.
http://www.cnbc.com/2015/08/31/september-shaping-up-as-feds-worst-nightmare.html
So the rate hike should be on hold they argue. I agree-yes, the real economy looks good but the market is awfully spooked about China and prudence says they ought to wait and see how this plays out first.
Until the market is better able to put its arms around what is happening in China and what is the real risk.
Meanwhile oil has been rallying. If this is the bottom in oil prices and we've had plenty of false bottoms this year, then this would be bad news for consumers but I'd argue probably good news for the market as oil companies are so important in the averages.
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