Markets & Economy

4 surprises — 1 domestic, 3 international — that could jolt interest rates

Japan is everyone's 'bug in search of a windshield'

Last week's look-ahead column closed with passing mention of surprises. Today we'll explore the potential for one domestic surprise, and three foreign oops-a-daisies. The more the four tilt toward oops, interest rates will fall; the more they improve, rates up. The world will not truly reopen until Friday, Jan. 9, with release of December job data. My domestic opinion has survived the week: Headwinds are lighter than any time in a decade. That said, tailwinds are also lighter, especially the good ol' cyclical recovery. In the aftermath of the Great Recession neither jobs nor housing has behaved as they "should," and the stock market rally may be more QE artifact than GDP anticipation. Disparate observers (Tim Duy, University of Oregon; Rick Rieder, Blackrock) have noted recent changes in the Fed's estimation of the job market. A four-year puzzle: a steady decline in unemployment, but a nearly equal decline in participation in the workforce. If unemployment really is falling, c...