Is inflation finally coming down? That’s a question we may have gotten an answer to on Friday…
Markets in Asia and Europe both started the year super HOT, and even after Friday’s face-ripping rally, we’re left playing catch-up here in the states…
Europe didn’t even close its market for New Year’s, which is almost unheard of… So they were up over 5% while the Hang Seng Index was up over 6% the past few days. Meanwhile, I’ve been left scratching my head over this tech stock malaise we’ve had before Friday’s bounce.
Everyone is worried about inflation coming down and the economy falling off a cliff. Big companies like Amazon are laying off thousands and thousands of people, so there’s still a great deal of uncertainty.
There was, however, a weird wrinkle that happened Friday, and it was interesting…
Is Inflation Finally Coming Down?
We had a bit of a goldilocks jobs number Friday with the economy adding 223,000 jobs in December, better than the 200,000 expected. But the thing that caught Wall Street’s attention was data that shows wage pressures — average hourly earnings — could finally be subsiding…
The market crashed in December when it was reported that wages grew by 0.6% for November, a massive number that is inflationary — but that number was revised down to 0.4%.
On top of that, we saw the number come in at 0.3% for December versus the 0.4% expected.
This indicates that inflation could finally be moving toward the Federal Reserve’s target, and that’s what Wall Street wants to hear.
The big problem for the Fed with the jobs market being so strong resides in the services sector, which has been stubbornly high as far as what people make. That’s an area where inflation hasn’t come down at all — until now.
So that’s largely why we saw the Dow up 650 points, the S&P 500 up 2.15% and the Nasdaq up 2.4% by 2 p.m. on the East Coast on Friday.
Now, this is something you have to keep in mind as an investor… The government can and likely does, in my opinion, cook the books on some of these numbers. So we saw a major relief rally Friday that could continue for a bit. But is inflation really coming down, or is this some fuzzy math? We really don’t know yet — so I’d still be careful about getting too long for the time being.
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