{"id":62865,"date":"2025-01-09T02:00:31","date_gmt":"2025-01-09T07:00:31","guid":{"rendered":"https:\/\/www.tradestation.com\/insights\/?p=62865"},"modified":"2025-01-09T08:31:36","modified_gmt":"2025-01-09T13:31:36","slug":"opposite-of-goldilocks","status":"publish","type":"post","link":"https:\/\/www.tradestation.com\/insights\/2025\/01\/09\/opposite-of-goldilocks\/","title":{"rendered":"Is the Opposite of Goldilocks Taking Shape?"},"content":{"rendered":"

“Goldilocks” is a common way to describe positive market conditions, but the opposite of that scenario may be taking shape.<\/p>\n

Low inflation and moderate growth is the normal meaning of goldilocks. The Federal Reserve doesn’t have to hike interest rates to bring down prices, but the economy is strong enough to support profit growth.\u00a0It’s not too hot and not too cold, but “just right.”<\/p>\n

Recent data, on the other hand, might be a little too hot and a little bit cold at the same time.\u00a0 December’s purchasing managers indexes from the Institute for Supply Management showed accelerating price pressures in both manufacturing and services. The most recent dose of that news on Tuesday triggered panic in the market, pushing the yield on the 10-year Treasury note above 4.7 percent for the first time since April. The S&P 500 also had its biggest drop since December 18, when the Federal Reserve signaled monetary policy will be less dovish in 2025.\u00a0Some investors may be wary of ISM’s price indexes because they gave one of the first signs of higher inflation during the pandemic.<\/p>\n

S&P Global, which issues similar monthly data, separately noted the U.S. manufacturers had the second-highest price pressures in December among 30 countries (trailing only Australia).<\/p>\n

Despite the higher prices, other points were potentially negative. ISM’s employment index fell sharply for manufacturing and slowed for services. A separate report from ADP showed private-sector payrolls rising less than expected in December, with manufacturing jobs down for the third straight month.\u00a0 ADP observed that the recession-proof healthcare sector is accounting for more of the job growth. Does that reflect weakness in the cyclical economy?<\/p>\n

\"\"

10-year Treasury yield index ($TNX.X), weekly chart, showing long-term high in October 2023.<\/em><\/p><\/div>\n

Still, initial jobless claims have dropped and last week hit an 11-month low. That may give the Fed little reason to worry about the labor market and contribute to keeping rates higher.<\/p>\n

Tariff Uncertainty<\/h2>\n

Other data from across the Atlantic was negative. Euro zone industrial confidence dropped to the lowest level in 4-1\/2 years and German industrial orders slowed. Inflation concerns are also an issue in Europe.<\/p>\n

Tariffs are a key piece in the story with Donald Trump returning to the White House on January 20. This week, he rejected a Washington Post<\/em> report he might backpedal on plans to increase duties on imported goods. A separate CNN article yesterday indicated he might declare a national economic emergency to impose tariffs. That could potentially reinforce expectations of higher prices.<\/p>\n

“Upside risks to the inflation outlook had increased ,” Fed officials said in minutes from their last meeting released yesterday. One of the reasons was “the effects of potential changes in trade and immigration policy.” As a result, the process of achieving 2 percent inflation could “could take longer than previously anticipated.”<\/p>\n

In conclusion, inflation has started accelerating again after two years of slowing. Some business leaders and Fed officials worry about the impact of tariffs on prices. The labor market also remains strong. At the same time, measures of future growth could be weakening. That could prevent the Fed from cutting, while flashing warning signs about the future. Has the opposite of Goldilocks arrived?<\/p>\n","protected":false},"excerpt":{"rendered":"

“Goldilocks” is a common way to describe positive market conditions, but the opposite of that scenario may be taking shape. Low inflation and moderate growth is the normal meaning of goldilocks. The Federal Reserve doesn’t have to hike interest rates to bring down prices, but the economy is strong enough to support profit growth.\u00a0It’s not […]<\/p>\n","protected":false},"author":39,"featured_media":59945,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"footnotes":""},"categories":[75,13],"tags":[],"class_list":["post-62865","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-stocks","et-has-post-format-content","et_post_format-et-post-format-standard"],"yoast_head":"\nIs the Opposite of Goldilocks Taking Shape? | Market Insights<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.tradestation.com\/insights\/2025\/01\/09\/opposite-of-goldilocks\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is the Opposite of Goldilocks Taking Shape? | Market Insights\" \/>\n<meta property=\"og:description\" content=\"“Goldilocks” is a common way to describe positive market conditions, but the opposite of that scenario may be taking shape. Low inflation and moderate growth is the normal meaning of goldilocks. 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