NOT TOO HOT NOT TOO COLD

The US is still in a Goldilocks economy

Everyone’s wondering when the US economy will get back to normal.

Economic growth has been stop-and-start since the recession, dragged down periodically by cruel winters. Wage growth and inflation have been lackluster.

But a return to pre-crisis strength seems closer now than it has in a while: We’re inching toward to full employment and hints of wage growth seem to be popping up here and there. It’s a so-called “Goldilocks economy”—a phrase coined in 1992, if you believe David Shulman, a former Salomon Brothers investment banker who said he first used it in a note to clients.

A Goldilocks economy is “just right”—hot enough to keep hope alive but cool enough to keep the Federal Reserve from raising interest rates and complicating Wall Street’s investment decisions.

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The Fed has kept interest rates near zero for more than half a decade, loathe to upset the precarious recovery. Since the last cut in late 2008, the S&P 500 has risen more than 130%, as low rates (and a massive bond-buying program) made stocks one of the best games in town.

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With a hike supposedly around the corner, any suggestion that rates will stay low for a bit longer is met with great enthusiasm. Just this morning, a pretty decent but still lukewarm jobs report sent futures spiking and saw the S&P 500 open more than 1% higher.

In other words, things still feel just right.

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