The most recent US monthly employment report for non-farm payrolls was so strong that it looked like it was on steroids. Will the inflation monster inside of Yellen’s head be treated by an incremental interest rate hike in December? 

Let me tell you a secret that some of us already know. There is no inflation at this point. Overall, the U.S. economy is expanding but wage inflation has yet to become a serious issue in a tightening labor market and the slump in crude oil is tempering prices as well as the trade balance. Connect these dots to divergently dovish central bank policies elsewhere and relatively weak productivity and manufacturing in Europe and China and the picture you get is a stronger dollar offsetting domestic growth (as evidenced by continually declining factory orders).

The Fed Reserve has taken its best shots and is now resigned to the normalcy of allowing free market gods sort wheat from chaff. Meanwhile, Europe and China’s central bank policies are having limited success in creating the desired effect of significant and sustainable economic stimulus. (For a recap of the week’s bullish and bearish economic events and other data, please refer to Hillbent’s daily archives.)

This week’s performance table speaks volumes in the most exaggerated manner possible. Rapidly rising treasury rates are clubbing investors over the head like baby seals and telling anyone who is left to exit bonds. Dollar strength is suppressing utility stocks and commodities (e.g.Gold and Oil) as they all suffered considerable weekly losses. Real estate assets also declined but may only be in correction or consolidation mode as this capital market tends to hold its own in rising interest rate environments. Stocks gave investors a respectable amount of positive performance, but their alpha-dog appears to be the small-cap Russell-2000. What is the canary in the coal mine trying to tell us?