Schwab Market Perspective: Half Full?

As summer heats up, it's hard to tell whether the beach ball is half full or half empty. Although a near-record-low unemployment rate underscores the strength of the economy, Federal Reserve officials keep pointing to the potential problems of a tight labor market and inflation that hasn't yet fallen back to the central bank's 2% target.

All this has the Fed poised to further tighten monetary policy—but given the rapid pace of past rate hikes, there's some concern that the Fed could overdo it, potentially causing a recession or triggering another round of problems in the banking sector.

Meanwhile, there are signs of softening in global services and manufacturing activity, and China is on the cusp of deflation.

U.S. stocks and economy: Attempting to escape June gloom

As has been the case for a while, the labor market continues to look mixed, which has comforted both economic bulls and bears. On the upside, the economy has added an average of 244,000 jobs a month (measured over the past three months) and the unemployment rate is hovering near its lowest level on record. Yet the downside is twofold: Some cracks under the surface are still visible, and hotter wage growth is likely working against the Federal Reserve's progress in controlling inflation.