US Economy Is Hot, Hot, Hot

Today, the Atlanta Fed's GDPNow tracking model raised Q3's real GDP growth rate from 3.2% to 3.4% (saar) following a roaring September retail sales report (chart). Real consumer spending was revised up from 3.3% to 3.6%! Jobless claims fell despite worker strikes and hurricanes. Manufacturing also held up well notwithstanding Boeing layoffs and bad weather.

Today's data further confirm our assessment that the Fed was too dovish when it cut the federal funds rate by 50bps on September 18. We immediately responded by raising the odds of a stock market meltup and forecasting a counterintuitive backup in bond yields. Sure enough: Stocks are climbing to new record highs and the 10-year US Treasury yield is up almost 50bps to 4.10% since September 18.