The jobs report came in this week and lit up the sky like Macy’s Fourth of July Spectacular. What that jobs report told you was that we are starting to see some momentum in the economy and this should translate to better earnings and appropriately higher stock prices. Well we aren’t jumping onto that train this time. The markets are usually forward thinking and the economy usually follows after the markets have made their moves. We think that this is exactly the case. The market has perched itself at all time highs and has broken one barrier and is about to break another one all signifying a belief that the economy has recovered and will expand once again at a rate that will add more and more jobs. That may be the case but the reality of the situation is this: The markets rose on expectations of the coming expansion. The expansion is here, markets will flat line: Earnings have been good to great while the economy has stayed stubbornly muted. With the economy picking up steam, shouldn’t earnings pick up steam as well? Not so fast. When the economy starts to heat up, hiring heats up, costs start to rise. Sure an expanding economy should have expanding sales but during the first leg of an expansion, earnings suffer for a quarter or two and that is what we will see.

Again, we will bring up inflation. Where is it? Every food item is up in price, every energy cost is up, medical care is up, prices of autos, houses, refrigerators, you name it, its up. Why isn’t inflation up? The true tell is wages are starting to rise and that should bring the inflation discussion back. If not, someone really needs to look into where these inflation numbers come from. It’s fishy, which by the way is also up.

This week coming up isn’t data heavy but there are some interesting talking points. The JOLTS number on Tuesday while a lagging indicator is very accurate and rarely gets revised. It continues to rise and should show some pretty good strength.


We will get to hear what the Fed has been thinking on Wednesday and we doubt there will be anything new in those minutes. Considering that Janet Yellen has already spoken, it should be a snooze. Some retail numbers should come as no surprise either. With retailer’s numbers shrinking by the minute, the question needs to be asked, where is everyone spending their money. Amazon?