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Two Weeks to Go! Time to Get Back on the Fed Bandwagon
So far, we’ve had two trading days in September and there has been barely a whisper about U.S. economic policy and the upcoming Fed meeting—until now.
This morning, traders and investors are giving a collective yawn to the news about Intel’s job cuts and Ford’s new CEO appointment as everyone gets ready for the biggest day of the week for economic data.
With only two weeks to go until the next all-important FOMC meeting, every report released by the Government is going to be analyzed in every way as economists and media pundits try to predict what the Fed is going to do next. Will the Committee hike again, continue to pause or simply determine that the one-and-only Greenspan/Bernanke rate cycle is finished.
Diligent Investor Sticks to its Forecast
The Diligent Investor has analyzed all of the economic data released since the August 8th FOMC meeting, and we have determined that the Fed is finished. There are no reasons or justifications for this Committee to tinker with economic policy because the U.S. economy is stable, but vibrant. The Fed has done its job, and it has done it well.
I wouldn’t go as far as giving this Committee a standing ovation for their work, though. Even though they didn’t bow to pressure from the public—or more importantly, Wall Street—to hike more aggressively, they did make a few rookie mistakes along the way.
One key error has been simply talking too much. This group has been quite chatty by doing a number of public speeches about economic policy while not realizing that every noun, verb, adjective and preposition is being monitored by the financial press. Even the Fed Chairman couldn’t escape the public eye when he made some minor comments to one of the most recognized financial journalists of our generation.
Mistakes will be made
But, live and learn. Mistakes will be made as the Fed continues to steer the U.S. economy in what will be some of the most challenging events in our lifetimes. As long as the mistakes are not catastrophic (i.e., stagflation, recession, or do I have to say it—depression), the Fed will keep inflation in check and keep the U.S. economy growing at a 2.5 to 3.0 percent clip.
But, today is today and the data released will determine market reaction. Volume is expected to be at normal levels as traders return from their Labor Day hangovers and get back to the business of living in a capitalist society—making money!
Full Menu of Economic Numbers
First up on the docket is the revised second quarter productivity numbers at 8:30AM EST. Wall Street consensus is figuring a 1.5% improvement, which should not move the needle to alarm Fed members.
Also at 8:30AM will be the release of the closely monitored unit labor costs, which are actually expected to be revised lower. If the number comes in below 4.1%, look for U.S. stock futures to jump on the news.
At 10:00AM, we will have the Institute of Supply Management’s non-manufacturing index. This figure is expected to edge slightly higher to 55% in August from 54.8% in July.
Then, at 2:00PM is the much-anticipated Fed Beige Book, which typically sets the stage for the next FOMC meeting.
And not to be outdone by the flood of economic reports, oil will get into the mix of things when the EIA inventory data is released at 10:30AM. The oil bulls will be running if inventories take a dip.
Stay tuned as the ingredients for another wild day on Wall Street come together.
Until tomorrow,
Todd M. Schoenberger, Editor
Diligent Investor
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