As we noted on Tuesday, we’re likely to see a hint of two to three hikes, down from four with further improvements in the global economy and inflation…

And that’s exactly what happened, sending U.S. markets to new 2016 highs.

While the Federal Reserve continues to see risks to the global economy, the U.S. economy has been resilient in recent months, pointing to an improvement in consumer spending, a stronger housing market, and job gains.

While it’s nice to see the U.S. savings rate back off from 5.5% to 5.2% in recent months as compared to the 4.5% of last year, consumers still are not confident, though.  We can see that in U.S. retail sales, which showed a sharp downward revision in January numbers.

DJIA

"The economy's engines are not going into reverse ... but at the moment, it is hard to see GDP with a 2 percent handle. Based on today's lackluster sales report, policymakers will be in no hurry to raise interest rates," said Chris Rupkey, chief economist at MUFG Union Bank in New York, as quoted by Reuters.

January retail sales were revised to show a 0.4% drop instead of a 0.2% gain.  February retail sales fell 0.1%.  But if we exclude gas and auto, sales were up 0.3%.

And, while the Federal Reserve is confident in jobs growth, we’re not.  The latest jobs report may tell us unemployment sits at just 4.9% but it leaves off the millions of people that gave up looking for work, as we’ve long argued.

If the Fed continue to ignore the economic realities plaguing the U.S., it’s setting us up for another disaster that we experienced after the December 2015 hike. 

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