Friday, March 14, 2014

The End of the Bull Market?

It has been my view for quite some time that as long as short rates were zero and real long rates were below average, and there wasn't a recession, stocks would continue to march higher. Given that broad consumer inflation is usually a result of accelerating wage inflation, I was concerned that last month's jobs report showed that wage growth for production and non-supervisory workers is at 2.5%. Now, in addition, we see another pretty strong indicator of incipient wage pressures: a decline in short-term unemployment (see link below).  The basic idea is that employers, rightly or wrongly, view the long-term unemployed as, to be crude, obsolete labor capacity. If true, this is not "an important negative" for stocks, it means the bull market will end fairly soon. I would guess sometime this year. 


Inflation Signs Lurk in Broader Labor Data Yellen Seeks: Economy - Bloomberg


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