Thursday, June 4th:
Another month, another yawn. I feel like a broken record, but here goes anyway. The economy is good, but not great. The markets are neither soaring nor are they plunging. Job growth continues to crawl higher, and unemployment continues to notch lower even while the labor force participation rate remains well below average for the past several decades.
In short, there's nothing to get too excited about. But, then again, there's not much to make us want to hide under our beds either.
One trend that is making people a little nervous is the ever so slight upward tick in rates. A couple of Market Reports ago, I talked about how the Fed seemed to be moving closer to raising rates as the economy strengthened. Of course, right after I said that, some of the factors that seemed likely to push the Fed to increase rates shifted directions just enough to give them cover for not doing so.
But lately, rates have started to drift upward again as continued, albeit slow, economic improvement once again puts pressure on the Fed to increase rates. Not that this is going to happen tomorrow. But the day is coming, or at least that's what people are starting to believe. And perception quickly becomes reality in the financial markets.
For evidence of this trend, consider the 10-Year Treasury. It had been as low as 1.73% in late January and remained mostly below 2% until late April, but then pushed past this threshold and appears to be staying there. Since April 28, the 10-year rate has been above 2%, and it is currently right around 2.25%. Many analysts fear that it will rise further.
But will it? Who really knows? This certainly would not be the first time rates were predicted to start rising and then fail to do so. And even if they do, we're starting from such a low base that any increase will take a while to start hurting.
Since we can't predict the future, and since I don't seem to have much of anything else worthwhile to say, I'm going to just hang it up for the month and see if there's anything more interesting that happens between now and July. And, speaking of July, it's summer, so this is as good a time as any to cut it short and get outside for some fresh air. After all, we only get a few months of nice weather around here. We might as well take advantage of it and leave off such unpleasant thoughts as rising rates, international discord, the prospects of yet another painful presidential election cycle, or another dismal Cubs season… well, maybe not – as I write this article, they're in second place behind the Cardinals in the Central Division – GO CUBBIES!!
So, take a break, get out of the office, go have a barbecue. We can worry about the economy and/or interest rates again in October when the snow starts to fly. GO HAWKS!!
Steve Cain
RPBG Director