Marc Chandler, Managing Partner of Bannockburn Global Forex and Editor of the Marc To Market website, joins us for a discussion on the macroeconomic factors moving the markets. We start off discussing the Atlanta Fed’s GDP Now readings shifting throughout the month with regards to GDP in the 2nd quarter going from positive, to neutral, to now negative growth expectations. The question was poised if we have two back to back negative quarters of GDP growth, then are we officially in a recession. From Marc’s perspective it is a more nuanced answer than something that simple, and he reiterates the Fed’s stated goal of slowing growth to curve demand, but points out that almost every economic datapoint that we get has been lower than expectations.
Next we pivot over to the health of the labor markets, and balance out the companies starting to shed workers and do layoffs, with the data the central banks site showing strong labor markets, with a focus on the upcoming US jobs Non-Farm Payroll numbers next week. The caveat brought up is that US jobless claims numbers have been steadily rising since March of this year, as much as 40% off the lows, which is showing a bifurcating picture of the health of the labor markets, and starting to tip more towards a recession.
The messaging from Jerome Powell is that the Fed is most concerned with achieving price stability than it is with avoiding recession, and for this reason Marc feels the Fed will stay on course hiking rates past the September meeting and into December and possibly into the first quarter of 2023. The concern from economists is that perhaps the Fed is getting aggressive with tightening policies a bit late and at the wrong time, into slowing economic growth. We wrap up with the actions central banks in other areas are taking in EU, Canada, and Japan, and how this affecting their currencies in relation to the US dollar, pushing the greenback higher in recent months. Marc’s message is to focus on value over the latest shiny new thing when investing for the longer term.