(December 3) – U.S. markets are rallying heavily on today’s benign labour report, but economists at Nesbitt Burns Inc. are urging caution.
Today’s report came in on consensus, indicating to bulls that all is right with the U.S. economy. Inflation is subdued, corporate profits will be strong, and sky-high valuations aren’t sky-high enough yet.
While the bulls are revelling, Nesbitt contends the report doesn’t change a thing: “The economy is red-hot, the labor market is super-tight, and while wage trends are not accelerating there is still plenty of pressure.”
While no one expects any interest rate moves during the Y2K transition, Nesbitt is calling for the U.S. Federal Reserve Board to move to a tightening bias at its December 21 meeting.
This prospect “is not in the market,” says Nesbitt, implying that unless the market comes around to Nesbitt’s view, a move by the Fed would come as a big negative surprise.
-IE Staff
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