Less Misery in the Misery Index (excerpt)

As I’ve noted before, bear markets tend to coincide with sharp increases in the Misery Index. It is the average of the unemployment rate and the core PCED inflation rate. The index was down to 7.8% during May from the most recent cyclical peak of 11.5% during March 2010. The unemployment rate has dropped from 6.7% at the end of last year to 6.1% during June. If it continues to drop at this rate over the rest of the year, it will be down to 5.5% by December. Inflation has edged up recently, but is likely to remain subdued around 1.5%.

Nevertheless, if the jobless rate continues to plunge, the Fed will be hiking rates sooner rather than later. Right now early next year is possible, and late this year can’t be ruled out. That might trigger financial tremors including a correction in stock prices. However, the US economy should prove remarkably resilient, which would augur well for a secular bull market.

Today's Morning Briefing: US Is Outstanding. (1) The next bear market. (2) End of NZIRP could be a shock, but might trigger a correction rather than a bear market. (3) Not much misery in Misery Index. (4) Resource Utilization Rate has room to move higher. (5) Leading indicators remain bullish. (6) Two regional business surveys are booming. (7) US oil production continues to soar. (8) Railcar loadings upbeat for autos and housing. (9) Production trending higher. (10) Semiconductors are hot, but not overheating in the US. (More for subscribers.)