The U.S. stock market is currently in a precarious position, according to Cole Smead, CEO of Smead Capital Management. Despite the Federal Reserve’s interest rate hikes, consistently strong jobs numbers and wage growth suggest that the desired impact has not been achieved.
In January, nonfarm payrolls increased by 353,000, well above the Dow Jones estimate of 185,000. Average hourly earnings also rose by 0.6% on a monthly basis, doubling consensus forecasts. Unemployment remained stable at a historically low rate of 3.7%.
Following Federal Reserve Chair Jerome Powell’s announcement that there would likely be no rate cuts in March, contrary to market expectations, Smead expressed concern about the robustness of the economy despite the 500 basis points of interest rate hikes.
Smead questioned whether the Fed’s policy tools have been effective in lowering the Consumer Price Index, citing the rate hikes and their impact on the banking and bond markets. He emphasized the unexpected strength of the economy as a significant risk factor.
Source (CNBC)
