America’s Goldilocks economy should be an alarm call for investors worldwide, says Nigel Green, chief executive and founder of deVere Group, a global independent financial advisory organization. The warning follows the latest robust U.S. jobs report. “July’s U.S. jobs data was strong across the board and June’s jobs report was upwardly revised. In effect, this rules out a recession threat in the near future,” he says. However, “the Fed will be conscious that though CPI for July came in at just one per cent year on year, further wage increases could lead to the target level of two per cent being breached quite quickly if Americans come to expect higher wages as a matter of course. When this happens, the Fed will raise interest rates in order to cool the labour market and the economy in general, and avoid exceeding inflation targets.” With the wage growth expectation now likely to pick up, the Goldilocks scenario now looks to be coming to an end with inflation becoming a real concern, meaning a rate hike is increasingly likely. And, a raising of U.S. rates will have important ramifications for investors not only in the U.S., but the world over.
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