Economic Whiplash

The Fed elected to pause in its rate hiking assault on inflation this week. With the backward looking data pointing to higher inflation that must mean they expect the economy to slow down and thus tame what incipient inflation is lurking around the corner. But wait, the data this week suggests the economy may not be slowing down. The market thinks that means the Fed will have to pick up the rate hike cudgel and once again do battle with inflation, which means higher short term interest rates. But the Bond King himself, Bill Gross, declares we are at a turning point and another bull market in bonds is about to appear! Ed Hyman of ISI (no slouch of a prognosticator) says the economy is going to slow down and therefore we are getting ready to have a new bull market in stocks - starting now! (Huh? Did I miss something?) Dennis Gartman thinks the next move the Fed will make is to cut rates, which means the economy will be visibly slowing.

And on and on. It is like watching a tennis match, as each new "data point" suggests seemingly conflicting information. It is enough to give a soul economic whiplash. But if we look at the data, it may not be all that inconsistent. The problem may be that it is not telling us what we want to hear, that both inflation and a slowing economy are a concern. Today we sort through a mound of data and see if we can make some sense of it, all the while pondering what Bernanke must be thinking late at night.

But first a personal note. This month is something of an anniversary. Some six years ago, in August of 2000, I put my first Thoughts from the Frontline on the internet. I had about 2,000 email addresses from a previous print newsletter I had written for another publisher. (Paper, how very quaint! And so 90's!) Over time the letter began to build up readers, and since the content was free, other publishers and web…