Stocks moving higher is still a hard uphill road to travel

The US stocks are trying to move higher. The Dow was up close to 600 points and the NASDAQ was up over 200 points at the highs today, but have given up a lot of those gains with the Dow near unchanged and the NASDAQ down -35 points.

The gains today came despite the stronger jobs report which showed 261,000 new jobs this month and 52,000 increase from last month. That’s over 300 K for the month. The unemployment rate is still at 3.7%. This is higher than 3.5% but not by much (historic low levels).

In certain times, strong employment is indeed a good thing and should be a good thing for stocks, but in the current environment where inflation is economic and publinc enemy #1, tighter labor is not a good thing.

The infrastructure build will continue to keep mega construction going especially in chip sector. In addition, car manufactures will have to build their EV cars in the US if they are to qualify for rebates to buyers. Cars built outside the US will not get that advantage. Do car manufacturers want to lose sales because they don’t build in the US and their cars cost more to the consumer? I don’t think so.

Big manufacturing is the new tech sector. IN a time where workers are scarce, that is not good for employment costs and in turn inflation. Inflation gets passed on and the more it becomes entrenched the harder it will be to control. This inflation is not like the tech market, however. Technology workers may cost money, but they can be very productive as well. Building a car is building a car.

Yes, higher rates will impact the economy. The Fed has no choice however, as persistently higher inflation will lead to higher unemployment eventually anyway. So kill inflation when the going is good in jobs. Slow growth, get things in balance and rid the markets idea that gains of the last few years are not what the future will be like.

Right now, I think there are those in the market that still think the Fed will pause and it will be rainbows and unicorns again. That stocks will go higher and higher.

IN reality is the Covid induced bubble is bursting.

Covid started it and put things out of whack. Economies shut, supply chains were messed up. People stopped going to work at work, but worked at home. People stayed in and entertained themselves in their homes. Governments and central banks in response created this la-la environement of free money to all man, woman and child. We saw SPACs become a thing and lead to speculation. We saw NFTs become a thing where people paid outrageous amounts for ape digital images.

Crypto, and GameStop and other meme stocks created a false environment where reality was not reality.

Buying stocks was free money.

Buying and flipping house became a thing again.

Then:

• Supply chain became a problem
• There was a chip shortage and car price soared
• Free paychecks stopped
• People realize, their gains in housing allow them to retire. The supply of workers fell
• Russia invaded Ukraine
• Energy prices soared.
• Food prices soared.
• Crypto came down
• Gamestop and memes got hammered
• NFTs got hammered
• Stocks go down
• Russia and China become more of a problem then they have ever been
• Businesses react by raising price
• Etc.

We wake up and inflation
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Read this Term is in our faces and we can’t do anything about it except by raise rates. However, central banks are so far behind that they hike and hike and hike just to get to neutral.