Investors measuring the health of the economy may want to give greater weight to the improving monthly jobs numbers than the negative first quarter GDP result, says Christian Menegatti, Chief Investment Strategist, Windhaven Investment Management. ‘I tend to be positive in the sense that job creation will drive the U.S. economy to stronger growth in the next few quarters,’ says Menegatti. Regarding inflation, Menegatti says the surprise Street-beating jump to 0.3% in the April core CPI was an encouraging start. It remains to be seen if it is sustainable in his opinion, but it is moving in the right direction and it should continue if the labor market continues to tighten. ‘Core inflation in the U.S. has accelerated lately and the recent rebound of commodity prices, together with the tightening of labor market is something worth keeping an eye on,’ says Menegatti adding that ‘high inflation in the United States is definitely not our baseline scenario.’ He says the yield on the benchmark 10 year Treasury bond has been driven lower by overseas buying will likely turn around and tick higher as the year progresses.
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