Goldie locks Meats Big Oil and a Bond Market warning.

Hi, Peter Barr here with the latest episode of the Taking Back Trumps America

podcast and Substack as we end the week now with our economy and market

rap.

This was a week that ended with some very good news for the markets.

Suggesting a bit of a reversal of the stag inflationary grip we are in,

real GDP grew well above expectations at 2.4%, as well as above the long-run trend line projected

by the Federal Reserve at 1.8%.

In other words, GDP growth has not been stagnant. In addition, on the inflation side of the stagflation equation, the GDP deflater fell 2.2%, well the employment cost index, a broad measure of wages

and benefits increased just 1% in the second quarter, the slowest since 2021.

Meanwhile, the Fed's favorite inflation measure,

the Personal Consumption Expenditures price index rose that is still high 4.1%.

These inflation signs are appearing despite robust consumption now driving growth.

But remember here that the core rate of inflation remains about double that of what the Fed needs to lower rates.

Markets did rally Friday on this Goldilocks news after a bit of angst during the week over a spike in long-term

yields and a corresponding dip in long-term bond prices. Long bond yields are

flirting with 4%. This bond price spike was interpreted correctly

as continued inflationary pressures in the economy. The other good news with a bad component was the avoidance of a

teamsters driven UPS strike. The good part of the news is that there will be

no inflationary disruptions in the supply chain.

Yet the contract was rich enough to bake wage inflation into the economy over the next several years.

Thus, this contract, in the eyes of at least some analysts, might trigger a dreaded wage price spiral, a while the stagflation of the 1970s. So the bottom line for the week is this.

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