Economic Strength Persists

Last week, we received data on GDP and the Employment Cost Index. On the GDP side, we learned that although the overall numbers were net negative, the spending numbers—namely consumer spending, corporate spending, and government spending—all pointed to an economy that’s doing quite well. Additionally, the Employment Cost Index showed higher wage inflation than the consensus expected. Combined, this data continues to tell the story of a strong economy, with few signs of the cooling that the Fed would like to see. A similar theme is expected this week with the April jobs data, which will be released this Friday. The consensus expects that job creation will be high and that the unemployment rate will stay low. This leads us to the Fed meeting this week, where it’s expected they will raise interest rates by 50 basis points to help cool the economy and lower inflation. The market is currently pricing in nine rate hikes by the end of the year.

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