Recent economic data suggesting the start of a slowdown might discourage the Fed from continuing its ...
Analysts at Clerical Medical were surprised the data released on 2 June was as weak as it was.
James McLellan, US fund manager for the group, says: "Some were expecting a 50 basis points rise at the end of June. There has been a shift in consensus to the view that this might not be necessary. We may have to wait until August for the next rise."
Unemployment rates were up to 4.1% from 3.9%. Wage pressure was 3.5%, down from 3.8% year on year in April. Private sector employment was down by 100,000.
The strong correction in the Nasdaq has not ruffled markets as much as expected. The recovery in technology stocks, especially blue chip stocks, is a reflection of investor confidence in the sector's sustained earning power and it was the smaller, riskier ventures that suffered the most.
McLellan says the fear factor pushed people into liquid stocks, which meant moving to the big tech stocks. One week into June, the Nasdaq had recovered to 20% less than its peak. Oracle, now the pre-eminent blue chip tech stock, was 10% off its peak. Meanwhile, many dot.coms have vanished without a trace.
He says: "There was some recovery in financials and healthcare in the latter part of March and early April. Some capital goods stocks bounced off their lows. Cash flows into mutual funds were good in this period, although there was some movement away from tech funds into more broad-based funds.
"If we go to a soft landing, you will have to like financials. For technology, you have to be more discriminating, but we still tend to stay overweight in the sector."
Particular areas of interest in technology are, unsurprisingly, broadband provision, mobile telephones, wireless data transfer and software that is required to enable all of these.
The retail sector has been suffering from a lack of pricing power, largely brought about by persistently low inflation figures.
In a soft landing scenario, inflation will remain down and problems will remain the same. It seems the Fed will not allow the economy to remain at its current strength, so the worst-case scenario would be if the economy slowed at the same time as inflation starts to pick up.
The Fed would then have to make a choice - tighten interest rates further, potentially over-cooling the economy, or leave it and hope that inflation will peak by itself. Neither of these possibilities would be ideal.
‘Important to have an anchor’
Report to be written by TPR
Lack of innovation for solutions
Some 2,000 consumers affected