Storylines serve a valuable purpose. They round out the incongruences and give meaning to things in a way people can quickly comprehend. This is especially true when it comes to the economy.
The popular narrative of the day is that the U.S. economy is moderately improving while the world’s other major economies – Japan, China, and Europe – are bittering over like a cold cup of coffee. But is this positively fact or is it mere fiction? Have the raconteurs missed the plot?
Stock market investors can’t make up their mind. They want to believe the story. But they have their doubts. One day the DOW runs up 200 points. The next day it gives it all back…and then some.
Anxiety over what the Fed will do with the federal funds rate is of particular interest these days. Will they raise rates? Will they hold them at zero? Perhaps later this week we’ll find out more.
The notion that the U.S. economy is strengthening is the storyline that will prompt the Fed to raise rates sooner than later. Continue reading
