Things are Changing for the FED

The driving force for the markets is moving away from inflation and rising rates and now resides in the minds of the Bears, the coming earnings outlook.

On the other hand it will be interesting to see if the FED can accept the fact that labor participation for the population above 54 years of age and especially those over 65 is below trend. Covid has had a big impact on those two groups as currently 90 % of Covid deaths reside in the over 65 group and those in the 54 to 64 group with poor health conditions which if you walk around in America these days, is rampant, too much fat and sugar in their diet.

Here is what I copied a few days ago after the last employment report. It is about another aspect of the labor market trend that is good for America but is no doubt sending shivers down the spine of the FED.

“A time to Celebrate..

Today’s employment report is like a shot of sunshine, maybe even lightning, in the long fight for equality, the fight that started when the Republicans and Ronald Reagan started the Supply-Side agenda which was just another name for moving money to the top.

Wage and employment gains are part of a large wave that includes making the economy more efficient by taking on the economic headwinds of climate change.  The two big “E’s”, Increasing Efficiency and Equality are the headlines that need to be front and center for the Progressive direction of today’s American government.”

How will we look at the markets now ?

Our approach now will be to differentiate between sectors where scared investors are hiding and sectors where growth investors are building positions. One area where we all know investors have been hiding, energy, probably is less attractive now, while areas that can deal with Climate Change, Solar and EV will be more in demand. More on this sorting process in coming weeks.