Despite six hikes in interest rates in the past eight months by the nation’s central bankers to end a vicious cycle of inflation, the U.S. economy created 263,000 new jobs in November. To be clear, after one of the most aggressive monetary tightening campaigns in over a century, the U.S. experienced above-average job growth in November.
A Federal Reserve Bank of Atlanta algorithm indicates the economy is experiencing spectacular growth this quarter, while a survey of leading economists indicates the economy currently is growing at a fractional pace.
Let’s talk about stock market volatility because we have seen some extraordinary volatility lately. Let’s start by recalling the basic axiom of investing in common stocks: If you want the so-called equity risk premium, then you should expect stock market volatility and, in fact, welcome it. It’s completely counterintuitive.
Stocks rose sharply Friday and for the week. Stock values have come down since Russia invaded Ukraine, and the price of the Standard & Poor’s 500 is now in line with its long-term compound annual growth rate of 7%. This indicates stocks are not overpriced like they were in the tech-stock bubble, which began in 1997 and peaked in 1999 and 2000 when the S&P 500 was out of line with the average annual 7% long-term growth trend.
It is a pivotal moment in economic history. The dust is settling from the economic shock caused by the Covid-19 pandemic. Meanwhile, the post-pandemic inflation crisis and Russia-Ukraine War linger on, creating stock market uncertainty, fueling fears of an economic downturn, and, in some quarters, of a worldwide financial disaster. So, the latest data on the service sector of the U.S. economy is indeed reassuring.