alt Hacker News> It really is an indication that the stock market is mostly speculative and not concerned about the actual economy
Not really. Strong jobs numbers in the midst of 3+ percent inflation means rates should go up. That, in turn, dilates time on future earnings. So making a company's future earnings more-heavily discounted will be a net drag on valuations even if the jobs numbers indicate those numbers, near term and far, will be higher.
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Yep. Job numbers are the “actual economy” – the actual economy is driven by wages and consumption.
Stronger wages → stronger consumption → higher demand-pull inflation.
But higher inflation implying that “rates should go up” is central bank doctrine. It’s not a general law of how economies function.
Central banks intervening with interest rate adjustments is what distorts the prices of equities downward, when inflation rises.
Without central bank intervention, inflation should theoretically push equities higher (a highly-inflated economy driven by rising demand is by definition a well-performing economy!).
Central banks intervene because runaway inflation can be harmful to wage-earners (they save in dollars, not assets).
But I’m not sure if a 2–3% inflation target is ideal. It seems to me that this arbitrarily low inflation target restricts the growth of the economy in ways that might affect wage-earners, defeating the stated purpose of monetary policy, since higher rates also have the effect of curbing job growth as well as raising the cost of servicing mortgages.
tbh, it makes it even sadder.
It means the entire economy runs on borrowing to fuel growth.
When all that cash is still coming fron QE, it’s gross.