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Why Not Be Bullish?
The prospects for rapid, deep Fed cuts are diminished following last week's dramatic upside US payrolls surprise.
Markets have ruled out a second consecutive 50bps rate cut at the November FOMC meeting. Traders were even beginning to evidence caution around a 25bps cut at the next policy gathering. A quarter-point move on November 7 was priced as less than a sure-thing.
For 2024 as a whole, market pricing reflected fewer than 100bps of easing on Monday in the US for the first time since before
The underlying basis for all economic growth is real (unit) sales growth. If dollar sales growth is 2% and inflation is 2%, then unit sales growth is 0! That means no increase in throughput. Throughput is what creates operating leverage. Profits can grow faster than sales, but not for long. There has got to be increased throughput for real growth. Those consumers who are workers when not working, in our current situation, with population growth less than replacement, will not support any real growth without an influx of immigrants. So how long will the news stay good? Only as long as the financial engineering and the positive influx of immigrants holds out.
I continue to believe that immigration is a good thing. We just need a little more organization around that process and some better rules for who qualifies and how they assimilate within the US.