Good data is now bad news for US stock markets – Charles Schwab

It is possible that good data could be interpreted as bad news for the US stock market at least in the near-term as strong economic data, especially on jobs, could prompt the Fed to unwind earlier. In contrast, good news may remain good news for international stocks, because the rise in inflation has not been seen globally and central bankers in Europe and Japan are not under pressure to communicate tighter policy, economists at Charles Schwab report.

Good news may remain good news for international stocks

“Now, strong data may suggest tighter policy is forthcoming and weigh on stocks as investors begin to expect an eventual downturn. We believe that the US economy can withstand tighter monetary policy and continue to produce solid growth after achieving ‘escape velocity’ and may no longer need the boost from the Fed’s extraordinary stimulus. But, in the near-term, it is possible that good data could be interpreted as bad news for the US stock market should strong economic data – especially on jobs – prompt the Fed to unwind earlier and faster.”

“The rise in inflation seen in the US has not been reflected globally. With inflation running at or below-average and relatively less stimulative policy rates, the European Central Bank (ECB) and Bank of Japan (BOJ) are not under pressure to communicate tighter policy. That means good economic data is likely still good news for these stock markets.”