As we begin the month of February, it would appear that the US Economy has suffered from a couple of data shocks, which, taken at face value, would call into question the validity of the current rally in nearly every asset class (save bonds) and give rise to fears of the US slipping into another Recession or worse.
First, the Gross Domestic Product read came in at a negative 0.1% for the fourth quarter. The GDP is mostly a bogus data point in an economy with a debt based currency. At this point, the negative data, like most data that will appear this year, will give the Federal Reserve the statistical cover they need to continue QE and decimate the dollar.
The Unemployment rate, which inched up slightly, falls into the same category. Given the paradigm shift that the US workforce is undergoing as the internet makes geography a non issue for anyone who works from a computer, and the demographic shift as the Baby Boomers ease into retirement make it hard to say what would constitute an appropriate amount of Unemployment at this time.
Full employment has always been a slippery concept, and at this point, the BLS statistics can be counted on to err on the side of covering the inflationary consequences of QE as well.
What has not changed is that people, when given the chance, will tend to spend more money than they have. This tendency is again being allowed to manifest itself as credit restrictions are easing in the US and soon, even your cat will begin to receive credit card offers as they did in the good old days of 2005.
The Federal Reserve and every Central Bank on the planet have stuffed every orifice of the financial system with cash, so much so that they must lend gobs of it out to remain solvent. The consumers are taking the bait, and the wave of inflation is now rolling through stocks and commodities. It will not stop until QE stops.
And given the propaganda that passed as economic data prints this past week, QE will be with us for quite some time. Plan and invest accordingly.