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How the Bond Markets React Pick one. Any one.
Or perhaps it is more than just one thing weighing on the economy, worrying Wall Street as they hope for the fourth quarter bounce and concerning investors to the point of disinterest. Add that to the numerous worries already circulating and you have the makings of a lot of trouble ahead.
No one can turn on the news or open a utility bill without seeing the long term and record setting costs of oil. Each step towards the next record eats away at GDP. At $50, the Gross Domestic Product was believed to be 3% on average. Nothing great but considering the pressure that oil has placed on the consumer, this is about right. But what if oil hit $60? Would the GDP fall below 2%? You can bet on it.
Some of this worry has now been evidenced in the lack of consumer borrowing. Coupling confidence with jobs numbers is problematic but the increase in consumer debt or more precisely, the cost of servicing that debt, has begun to concern the average citizen.
Add to that the mortgage rate increase, which by the way is still at significant historical lows of 5.82% for the thirty year, and you have the makings of a troubling trend working against growth.
Those ingredients, stirred gently by the Federal Reserve could stoke inflation. If that happens, the tightening that the Fed was attempting to do in measured steps might come to halt.
With all eyes on the stumbling state of job growth, the fixed income markets reacted in kind. With only 96,000 new jobs created and the previous month's total revised downward, bond yields fell moving as they do in the opposite direction of prices. Too many worries are on the minds of CEOs to see any real change in the near term. Job creation only creates health and pension problems, something a good many businesses are trying to grapple with alongside a growing concern about international security.
But almost everyone agrees, a pause by the Fed signifies that all of these worries, concerns and fears are well founded. So pick one and hang your investment hat on it. Chances are, you will be wise to have been worried.
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