May 12, 2000

First quarter numbers for the U. S. economy are in. Real GDP growth was better than 5%, the unemployment rate is at a thirty year low, productivity gains are slowing down, the employment cost index increase was higher than expected and the deflator increased better than 2%. Most people on Wall Street, and quite possibly the Chairman of the Fed, believe these numbers suggest a strong economy with some indication of building inflationary pressures. That is why the market consensus is that the Fed will raise the Fed Funds rate at the next meeting. The only uncertainty seems to be whether the Fed will raise rates 25 or 50 basis points. We also believe the Fed will raise rates. However, that doesn't mean we think they should. We still feel a rate hike is inappropriate, but, that said, time is better spent addressing possible investment implications of a rate hike.

You must have an active account to view these reports. You may register for a trial here

Download Complete Report in PDF Format

Download Complete Report in Word Format