Jobs Up. Interest Rates Up. Stocks Up?
Today’s February jobs report may be the cue the Fed needs to proceed with their mid-year rate hike. New jobs beat estimates and the unemployment rate fell to 5.5%. Of course, stocks are down today as many market participants are afraid to “fight the Fed.”
We feel the good news on jobs is good news for our stock market. We think the Fed will be careful and gradual in the way they raise rates, minimizing shocks and allowing investors to adjust to the new norm.
We also feel that banks are going to start to lend as their spread widens between funds borrowed and funds lent. More lending leads to more investment, more jobs, more consumption, and a new virtuous cycle, helping to sustain our U.S. economic growth beyond 2015.
Sure borrowing costs will be a little higher, but they are coming off a very low bottom and, although energy prices may rise some, the economic benefits of lower energy should be with us for a good while.