(August 4 – 13:30 ET) – Today’s jobs data likely puts the final nail in the coffin of imminent rate hikes, according to most economists, adding the report could lay the foundation for a rally.
The benign job growth shown in this morning’s report pulled some industry players firmly into the dovish camp, including Goldman Sachs. Conventional wisdom suggests that if the Fed leaves rates alone this month then we will see three months of stability since it will not move during the U.S. election unless it’s unavoidable. That leaves the Fed on hold until November at the earliest.
An article in today’s Economist says a three-month hiatus on hikes could spark some market momentum in two ways. On one hand stocks would probably rally. It notes that Goldman’s Abby Joseph Cohen is calling for a 10% rally in the S&P 500 by yearend.
The market, the Economist observes, remains divided between a bunch of expensive tech stocks and a load of “old economy” stocks that seem fundamentally undervalued. This is where flat rates may also help out. It says rising rates have kept the high-yield market in a slump, keeping privatization deals softer than they would be otherwise, based on valuations. Rate stability may perk up activity in this end of the market as well, it suggests.
-IE Staff