We had two inflation reports last week.
One reported the Consumer Price Index, which came in lower than expected, and the Producer Price Index which came in higher than expected.
Most attention was placed on CPI and the need for the Federal Reserve to cut rates in September.
The Fed Chairman testifying before Congress expressed some concern about the labor market.
The essence of the problem with labor is that some feel the economy is slowing.
The latest employment numbers did come in stronger than expected, but almost all the gains were from government hires. Though those are paying jobs, they don’t create anything but salaries.
It helps on consumption but brings nothing to productivity.
A possible rate reduction is touted as the savior.
It won’t turn the economy around, but it will attract cash to the equities market.
With treasuries lower yields, cash will return to the market.
It almost seems that analysts look for any excuse to invest.
Here is an original thought.
How about earning more money.
I am aware of the impact of inflation and though it is slowing it costs significantly more to live now than it did five years ago.
That won’t change, but we do adapt as we have multiple times in the past. Technology will impact our way of living.
I am hopeful that, as in the past, it has exponentially expanded our productivity, which will translate into profits.
So, as difficult as it seems, we will find a way to adapt yet again.
That is not to say the economy is not cooling down a bit.
We run in cycles and this one got way ahead of itself.
The real culprit is not high interest rates and inflation. Those we can adapt to and live with.
What is sitting at our door is the national debt.
There is no way Congress will deal with this problem.
Just like they don’t want to deal with Social Security heading toward default. This leaves you in somewhat of an interesting situation.
I sincerely believe the rest of this year will be nothing but more record-setting closing highs.
But we kicked the can down the road and the cliff is getting close.
No matter the outcome of the election, this problem will not go away and will not be adequately addressed.
You can be optimistic about the future, but there is room for reality.
The only real solution will come when Congress is forced to act and they will only do that when the situation gives them no alternative.
So it appears we enjoy the party while it lasts.
I am not fighting this market and enjoy taking profits along the way.
It does seem that we have some time left and that gives you ample opportunity to invest.
That wall of worry is still there but is getting beat down of late.
We will be optimistic of what the future brings after the election.
Technology will continue to drive this market.
Fear is actually a good thing and greed will get you in the end.
I see no reason not take advantage of every opportunity the next six to nine months brings.
Just prepare yourself for a change in direction.
Sort of like heading out on a trip expecting the best, but preparing yourself for unforeseen adventures that you can handle.
I will admit that I find these old tired expressions about trends in the market wearisome, but the first two weeks in July proved to be significantly better than even predicted this time around. Some old dogs still have life left in them.
We shall see how the fall drops or the election high fares this time around.
