Transcript:
Tom Vaughan:
Hello everybody, welcome to Thursday. The S&P 500 was down .7% today. We got a couple of different catalysts. Number one, we had this company called Evergrande, in China. Big real estate firm, 300 billion in debt. They defaulted on some of their interest payments, on a couple of their bonds and so there’s going to be some news coming out about that, as they try to figure out what to do, do they get restructured and what is China to do with that, as far as that goes.
The second big catalyst is kind of an ironic one. And that unemployment number came out today. And the number of people that applied for first time unemployment was 184,000, which is a low going back 52 years. Normally think that sounds good. But that’s not really how the stock market works. When you have unemployment going too high, that can be poor for the stock market, just because it looks like the economy slowing down. When unemployment claims go really low like that, especially in an environment like this, the market starts be worried about inflation. It starts to worry about a tight labor market, especially with 11 million open jobs. And so the inflation number comes out tomorrow, I think the market is kind of waiting around for that. Also, the expectations that we might see 7-7.1% increase inflation year over year for last November, you know, which is pretty high. And so the market’s, you know, reacting to this labor number in this context of inflation and this kind of fear of what’s going to happen.
The Federal Reserve meets, you know, next week. Gonna be talking about what they’re doing to fight inflation. So I think those fit together actually, I personally feel like these tips situations are much better than some of the situations that we could be in. So for example, you know, last year, there was, you know, a lot of jobs lost, we had 16 million jobs disappeared, you know, basically overnight, because the pandemic, now we have 11 million jobs that are open that people trying to fill, and they’re basically trying to get, you know, this economy, keeping up with the demand. I think that you know, too much demand for what we can supply is a problem, but it’s a better problem to have. And I do think, again, that we will work through this, this situation will resolve itself, as long as that demand continues to be there.
You know, wages are going up, that means people have more money to spend, you know, all of these different types of things. So there’s a cycle here that I think is okay. We’ll see what happens. We’ll be watching that, but it does create some volatility through this timeframe, and that’s something that’s going to happen.
On the good news side, the Senate did pass the debt ceiling increase bill. This is a one time bill that allows the debt ceiling to be increased with just 51 votes. So the Democrats can control this themselves, that goes to the White House to get signed as a law comes back, and they’ll probably get that through tonight, tomorrow, and we’ll have that behind us, which I think is a really big deal.
So things are okay, just expect some rockiness here as we go through this inflation number and the Fed meeting next week, and you know, kind of see what happens as far as that goes. But, you know, again, good problem to have with too much demand and not enough supply. So, you know, still problem but better than some of the alternatives. So I look forward to talking to you tomorrow. I have my show. I’m going to do a summary of what’s happening for the week at the beginning of that show. It’s 12:15 to one o’clock on Fridays. Talk Money with Tom just go to YouTube, you can find it. So look forward to seeing you then. Thank you.