Perfect storm for inflation could rock the market - News and Current Events | futures io social day trading
futures io futures trading

Perfect storm for inflation could rock the market
Updated: Views / Replies:283 / 0
Created: by kbit Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 100,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors – all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you don’t need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Thread Tools Search this Thread

Perfect storm for inflation could rock the market

  #1 (permalink)
Aurora, Il USA
Trading Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
kbit's Avatar
Posts: 5,895 since Nov 2010
Thanks: 3,310 given, 3,352 received

Perfect storm for inflation could rock the market

As investors cheer the good news for job growth that came with the February employment report, they may be overlooking a troublesome dynamic: A tightening jobs market, in combination with rising commodity costs, could stir inflation, cutting into corporate profits and forcing the Federal Reserve to become more hawkish.

On Friday, the nonfarm payrolls measure showed an increase of 175,000 jobs in February, well above the weather-dampened expectations. And though the unemployment rate ticked up to 6.7 percent from 6.6, the broadest measure of unemployment, the U-6, dropped slightly from 12.7 percent to 12.6 percent—the lowest reading since it was at that level in November 2008.

Since the U-6 counts all unemployed workers, plus marginally attached workers and workers employed part-time for economic reasons, it could be a better measure of the remaining supply in the labor market. The decrease in the U-6 could thus indicate that the "slack" in the labor force—which allows companies to hire more workers without paying more—is decreasing. Once the slack is gone, wage inflation tends to follow.

"Measuring slack is not an easy thing, but an unemployment rate of 6.7 tells you there's a lot less slack than there used to be," said Peter Boockvar, chief market analyst at the Lindsey Group. "The idea that all of the people who dropped out of the labor market will magically come back just doesn't make sense—particularly for the low-end worker who is now enjoying a lot of government benefits. Therefore, the labor market is getting tighter than the Fed thinks."

As a result, "the inflation trend is going to start moving higher. It's not a single event that will happen—it's a process. But it's definitely worth watching," he said.

The other factor that could contribute to this trend is the recent rise in commodity prices. The CRB commodity index, a broad measure of prices, has risen some 10 percent this year. It's at its highest level in over a year, due to tough agriculture conditions and winter weather issues that have sharply increased the prices of many commodities. More recently, the crisis in Ukraine seems to have boosted prices of commodities such as wheat and corn.

"Increasing commodity prices will drive a rise in inflation," predicted Kathy Lien, managing director of FX strategy at BK Asset Management. "It's a natural reaction to the recent growth as well as the geopolitical uncertainly that is happening in the global economy."

A broad measure of inflation for the month of February will come on Friday, when PPI-FD is released. This recently revamped version of the Producer Price Index tracks changes in the "final demand" prices paid to producers for goods and services. And because it looks at inflation being experienced by producers, rather than consumers, it is considered an early gauge of the extent to which inflation will be experienced by consumers.

The consensus estimate is for the PPI to show a 0.2 percent month-over-month percentage change for February, while the PPI with food and energy stripped out is expected to come in at just 0.1 percent, according to FactSet.

"Even with the change in methodology, you're going to start to see the commodity prices moves in these numbers, potentially," Boockvar said.

Higher commodity prices and faster-than-expected wage growth are actually the two risk factors that legendary bull Jeremy Siegel pointed out in an interview Tuesday in CNBC's "Futures Now." He warned that the labor market "could be tighter than we think," which will create a serious dent in corporate earnings, given that companies will need to pay more to their workers. And the Wharton professor cautioned that if commodity prices continue to rise, then the Fed will need to rethink its dovish activities.

After all, the continuation of the Fed's shrinking quantitative easing program and maintenance of its ultra-low federal funds target rate are premised on low inflation. One major concern about stimulative policies is always that they could spur inflation if used irresponsibly.

In fact, if inflation rises to 2 percent and the headline unemployment rate drops by just another 0.2 percent (to 6.5), then both parts of the Fed's quantitative guidance regarding what will make the central bank raise the federal funds rate target will be satisfied. And a higher federal funds rate will likely mean higher bond yields across the board, potentially making equities less attractive by comparison.

"The broad consensus is that there's no inflation. But if there's one thing that mucks up Fed policy, it's a faster-than-expected uptick in inflation," Boockvar said. "If that happens, the Fed isn't just behind the curve—they're behind 10 curves."

That's why Brian Stutland of the Stutland Volatility Group will be watching PPI so closely, especially as it relates to gold, which is considered an inflation hedge.

"If you see the PPI number start to creep up, that's maybe the only reason I start to become more bullish about gold," Stutland said.

However, he adds that if the measure comes in low, as he expects, "that's going to give me more confidence that the stock market is the place to invest right now."

Perfect storm for inflation could rock the market

Reply With Quote


futures io > > > > Perfect storm for inflation could rock the market

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Upcoming Webinars and Events (4:30PM ET unless noted)

futures io is celebrating 10-years w/ over $18,000 in prizes!

Right now

Similar Threads
Thread Thread Starter Forum Replies Last Post
The Perfect Storm - Santelli Meets Farage kbit News and Current Events 0 July 9th, 2012 03:37 PM
Roubini: My 'Perfect Storm' Scenario Is Unfolding Now Quick Summary News and Current Events 0 July 9th, 2012 10:00 AM
Global Economy May Confront 'Perfect Storm' in 2013: Roubini Quick Summary News and Current Events 0 May 9th, 2012 01:40 PM
REITs Finding a 'Perfect Storm' To Ride the Real Estate Wave Quick Summary News and Current Events 0 February 15th, 2012 03:40 PM
Roubini Says ‘Perfect Storm’ May Threaten Global Economy kbit News and Current Events 1 June 13th, 2011 01:45 PM

cnbc, commodities, comparison, earnings, federal reserve, futures, news, people, quantitative, stock market, strategy, trend, uptick, volatility

All times are GMT -4. The time now is 04:55 PM. (this page content is cached, log in for real-time version)

Copyright © 2019 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432 WhatsApp Business,
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2019-06-18 in 0.19 seconds with 14 queries on phoenix