Predicting in Confusing Times
By Mark O’Brien, Senior Broker
On one hand . . .
U.S. employers are adding hundreds of thousands of jobs a month – adding 431,000 jobs in March – and they would hire even more people if they could find them. U.S. initial jobless claims are at a 54-year low. Wages are rising at their fastest pace in decades.
Businesses are investing. Commerce Department data show U.S. business profits surged 35% last year, the most since 1950. In all four quarters of the year, the overall profit margin stayed above 13%, a level reached in just one other three-month period during the past 70 years.
Consumers are spending and households have trillions in savings. Indeed, the business profits mentioned above are due in large part because of strong household demand.
On the other hand . . . .
U.S. interest rates have risen materially. The average interest rate on the most popular U.S. home loan – the 30-year fixed-rate mortgage – increased to 5.13% last week, up more than 1.5% since the start of the year and the highest level since November 2018.
Strong consumer demand along with surging energy and food costs and global supply constraints have pushed U.S. inflation to a new four-decade high of 8.5% in March from the same month a year ago.
To complicate things further: global turmoil . . .
The war in Ukraine could last many more months, possibly years. The impact of Russia’s Feb. 24 invasion continues to ripple around the world.
China’s recent Covid lockdowns are putting its economy under strain and threatening once again to disrupt global supply chains.
Inflation “fever” is world-wide. India: 6.95%. Eurozone: 7.5%. U.K.: 7.0%, Brazil: 11.3% (all data for March).
These are arguably unprecedented times for futures prices. In the midst of such uncertainty, the call to manage your trades becomes even more important. The potential for price moves even more favorable and profitable than usual for your trades is very attainable. So too is the risk more pronounced. These are the conditions many traders go after.
