In this video, FOX Business Network presenter discusses the solidity of the current US market. He points out that the 10-year treasury yield is standing at 2.99% and discusses the industry with Chief Economist at Moody, Mark Zandi.
Zandi emphasizes the importance of a strong economy (businesses need to be able to sell what they are producing; i.e., people need to have the money to buy) as if that is not performing well it will negatively impact the performance of stocks.
Yields are beginning to flatten and possibly invert, signaling the beginning of a recession, with simultaneous anxiety and fear that the Fed will overdo it and raise rates too quickly. But Zandi believes the economy will grow very strongly especially with the tax cuts coming and big government spending increases. This will result also in a decline of unemployment – going into the low 3s which hasn’t happen and when does approach that, leads to problems like higher interest rates and inflation. Unfortunately Zandi believes, the Fed always overdoes it.
If you look at the personal saving rate it is close to a record low and the Fed is sympathetic to people’s fears and try to ensure the inflation rate does not develop or at least, not at such a high speed. That’s why Zandi believes “the Fed probably will raise rates, but slowly in the context of very low unemployment and the raise in price pressures that are developing.”