Which would investors prefer? A strong economy implies higher interest rates for longer. If the economy slows, then our Federal Reserve has more room to lower rates sooner. Each scenario is at odds with the other. Perhaps there is a middle ground between the two, but that is not what we are getting. We have strong economic growth and high short-term interest rates.

The Bull and his partners see a strong economy that is showing signs of acceleration. Remember, the Inflation Reduction Act, the Infrastructure Bill, and the CHIPS Act are all funding more and more projects. These add to already healthy economic activity.

Thankfully, inflation has come down sharply from its recent peak. More supply is offsetting the strong demand. Competition is the best regulator of prices. Anyone who tries to raise prices during periods of plenty finds a competitor who will undercut them. This is how capitalism is supposed to work!

So which scenario should be preferred? A sound, growing economy that produces good profits is always to be preferred. People have jobs, spend money, and can better their lives. Businesses have incentive to invest in their own growth and productivity, too. Competition will keep things from getting out of hand. Interest rates will eventually reflect supply and demand for it. That is the way it should be! Stay steady my friends.

The Lonely Bull