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Slow Motion Slowdown?

Once again yesterday we got some economic news that points to a slowing economy when the JOLTS (job openings and labor turnover) report for April came in below forecast–the forecast was for 8.4 million job openings and the number came in at 8.1 million.

Today we have the ADP employment numbers in 30 minutes and we will see what the employment side of the equation shows occurring in the job market–ADP has become more respected for accurate data in recent months so the info is worth watching.

The 10 year treasury is trading at 4.33% this morning–down 17-18 basis points from the close last Friday. Wow!! Markets are thinking the slowdown is finally here and I am beginning to agree – of course we need more data–we always need more data. Now the most important piece of the puzzle we need is some moderating inflation data. Of course falling 10 year yields do not translate into a falling Fed funds rate–at least not immediately, but it now looks like to me that we will see a rate cut in September–or maybe sooner.

I am a buyer–of what I do not know yet, but I will be looking over my current holdings for high quality, lower coupon issues to see what may garner capital gains if rates continue to come down. Many of those issues have already garnered good gains but they have further to go if we see rate cuts. Alternatively I have a large selection of baby bonds from BDCs and term preferreds that will provide high yields-8% or so. I can’t buy much as I am mostly fully invested and don’t have much cash–BUT I do have funds in the Gabelli Treasury AAA money market that can be sold if I need to generate cash before CD maturities.

We’ll see if we can stick a ‘soft landing’–economic data is due in 10 minutes–watching anxiously.

4 thoughts on “Slow Motion Slowdown?”

  1. I have a big chunk of cash just sitting in SGOV. I was hoping for a bigger shock like last year. I think I will patiently wait. Not the worst thing in the world to have a bit of liquidity no matter what happens. Even though the 10 yr yield is at 4.33% or so it seems like many preferred have not quite reacted much. For now I keep reinvesting and tossing a few thousand every few weeks to keep buying. I guess it keeps me entertained without really committing quite yet.

      1. Hyperbole aside…the real question is why Canada and Europe are cutting their rates at this time. Is it because the inflation dragon has been slain or because their economies are slowing down? Neither reason would currently apply to the United States, so the expectation that rates here will get cut soon is… misplaced.

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