Why The World���s Most Important Economic Data Release Has Unnerved Markets

In recent years (in fact, for practically the past decade), a disappointing jobs figure has been welcomed by markets, because it meant that monetary policy would stay lower for longer.

And at first, that's how investors took it on Friday. When the data came out, the Nasdaq spiked higher, as did gold. Yet they both ended the day lower - the Nasdaq particularly so.

So why the change of heart?

The investment environment will change either way

The problem for markets today is that the Federal Reserve seems keen to at least start "tapering" (that is, reducing the rate at which it is printing money), and this jobs report isn't weak enough to justify holding off.

Worse still, inflationary pressure remains strong. That's really bad news as far as markets are concerned.

Rising inflation driven by a stronger economy might mean higher interest rates, but it should also mean better corporate revenues and profits. Costs (raw materials prices and wages) might rise for companies but productivity gains and increased sales might offset this.

But if you get both inflation and a weaker economy, also known as stagflation, that's the worst of all worlds. The world's central banks will struggle to deal with that problem, because it's theoretically not meant to happen.

Of course this is one jobs report. As we noted earlier, they get revised regularly. And while the Fed might want to taper, that doesn't mean it'll be raising interest rates any time soon (though central banks across the rest of the world are talking a lot tougher than they were).

However, it does all leave markets between a bit of a rock and a hard place. Either things go right, and we end up with a stronger economy and higher rates and higher-than-in-the-past inflation, or things go wrong, and we end up with a stagnant economy, but one that still struggles with inflation.

Either way, that's a very different environment to the "always teetering on the edge of deflation" world we've been living in for at least a decade now. Which in turn implies that your investment portfolio will need to look different too.

We'll be discussing this in a lot more detail at this year's MoneyWeek Wealth Summit next month. We're currently finalising the line-up and I can guarantee you won't want to miss it. The early bird deadline is fast approaching so make sure you get your ticket now!

Until tomorrow,

John Stepek

Executive editor, MoneyWeek

Source : https://moneyweek.com/economy/us-economy/603967/why-the-worlds-most-important-economic-data-release-has-unnerved-markets

Why the world’s most important economic data release has unnerved markets


Why the world’s most important economic data release has unnerved markets

20 Years of Aloe Vera at LR Health & Beauty


20 Years of Aloe Vera at LR Health & Beauty