Uh-Oh, Here come the politicians...
And therein lies the risk to financial markets and the economy. To the extent that politicians become more and more aggressive in their attempts to drum up jobs - either in the form of protectionist measures against China, India, etc. or in the form of taxes/penalties for companies that "outsource" jobs to other countries - the greater the cost to actual job creation. And given how heated the coming election is going to be (the red states vs the blue states), the potential for increasingly aggressive government measures to generate jobs is quite high. And, just as the Fed's intervention continues to cause disequilibria in the free market, such federal job-protection policies have just as detrimental an effect on the free flow of labor and capital.
Keep a close eye on the political environment associated with the jobs debate as we approach November. It's going to be THE issue.
P.S. - As an aside, wage growth over the last 12 months up 1.6% is the smallest gain since 1986. With tax benefits running out in the 2H:04 and wage and employment growth this slow, it's hard to imagine why anyone would want to be an aggressive buyer of the consumer cyclical stocks.
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