All in good time

by David Taylor

 

This week saw the release of some key employment data out of the US. Wednesday night saw the release of the increasingly important private sector gauge, and last night we received figures on non-farm payrolls. Both showed improvement - which is great, but let's not get ahead of ourselves.

 

The reality is that the US has pumped an extraordinary amount of stimulus into the economy. Meanwhile the unemployment rate is still relatively high, and the consumer is still concerned about the outlook. It needs more time.

 

In fact that's precisely what the US Federal Reserve states in its latest comments. It forecasts it will take another 3 years before it reaches the 5-6 per cent range again. By that stage you would hope that the government has improved its balance sheep, that interest rates are on the rise again, the manufacturing sector is robust and the trade balance has improved. No doubt this would all coincide with a more confident business sector and consumer.

 

Markets are impatient though. We want a quick fix. Unfortunately that ain't going to happen. Plenty of work still needs to be done and it will take years - and a change in the mindset of policy makers in the US. Rather than becoming too concerned about it though, recognise that it's still a work-on-progress and employ your money in companies, sectors or commodities that are going to reward you with greater assurance.

 

Oh and the other thing you can bet on is that the Fed won't be raising rates any time soon. To do that would be to ask someone with a sprained wrist to lift some weights. It doesn't make any sense. The US still needs plenty of support...and as that continues we will no doubt continue to see small signs of improvement in conditions with the occasional set-back.

 

David Taylor

Disclaimer

The content in my blog is non advisory, please do not interpret this as advice in any way shape or form. These are just my thoughts and nothing I say should be acted upon.