A Nothing Burger is Better Than a Dirt Sandwich

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Average hourly wages have climbed unevenly higher, and productivity gains have been inconsistent.

Yesterday the Fed acknowledged that inflation finally reached its target level of 2% and that they were comfortable around that level. Other than that, the statement was essentially a nothing burger and the Fed held steady on their benchmark rate. The Fed will be data dependent but they have been saying that for 8 years. If anything, the statement has a slightly dovish tilt by removing the phrase “the economic outlook has strengthened." This should be a positive for equities fearing higher rates. But stocks are choosing to eat a dirt sandwich by fixating on near term geopolitical risks and earnings, which are so good, investors are worried that this is good as it gets. Meanwhile wages are running hotter and while productivity ticked up in Q1, investors are concerned it is not sufficient to sustain 3% GDP growth. Through all the speculation and angst, investors are ignoring the tax cuts, which are weaving their way through the economy. Yes, the cuts immediately boosted earnings for many large companies but the growth potential will be most impactful in the small business, which is the backbone of the U.S. economy and has added more jobs to the economy since 2010 than large companies. Please watch wages and productivity on page 65 of the Global Perspectives Book.

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