The Fed is currently fighting a battle on two fronts, make sure that there is enough money in the system to promote the recovery from the great recession and at the same time keep a lid on any inflation.
Each year the Fed sets a target that they feel that should allow for growth without having the economy turn into a period of runaway inflation.
In 2012 the Fed had established a target rate of a little less than 2%,on Friday the Labor Department CPI came in well over what was expected and was up more that. 5% from march of 2011.
Where are the boogey men coming from?
The usual suspect is rising energy prices, but now there seems to be a problem of rising rental rates. There are uncounted numbers of homes around the country that are still vacant five years after the housing bust. Many of those homes are now being used for rentals as former homeowners scramble to make ends meet. Nationwide rental costs are up more than 2.5% from last year.
Are we going to see a period of rising interest rates and some mild inflation?
Is it possible that it might not be a bad thing?
Historically rising interest rates have been good for small businessmen and have been the sign of a healthy economy.
They didn’t call it the great recession because it was brought on by inflation; it was deflation that was the cause of the problem.
No matter which way the market goes technical analysis can help you to make the right decision. It will allow you to react to what the market is doing, predicting the future is very tough at best.
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As Always,
Keep those stops tight.
Todd “Bubba” Horwitz
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