MARKET COMMENTARY
In the last full trading week of the year investors are hopeful that Santa Claus will bring us a stock market rally for Christmas. Fortunately, presents are already on the way with an exciting week of data wrapped in unemployment reports and inflation stats. We’ll get to see if the Fed’s preemptive cuts were necessary and finally finish coloring in the picture of the economy since the fog of the government shutdown began. We’ll also receive retail data giving us a better idea of where consumers are at in their gift giving plans this year.
Last week the Fed cut rates again by 25-bps without a clear image of where unemployment and inflation data sat. Now the time has come when the gaps will be filled and the world of uncertainty that we’ve lived in for far too long will come to an end. There are mixed forecasts on what to expect, but the overall consensus on the Consumer Price Index tells us there will be no drastic changes from the average 3% range it’s been at for the past year. However, the multiple Fed cuts since September are working against reducing the inflation rate, so there is some upside risk to the report. The unemployment rate is predicted to see an increase from 4.4% in September to 4.5% in November, with October data never to be released. This will give more insight into next year and whether the Fed rate-cutting cycle will continue. If job data is softer, we can have higher hopes for a Santa Claus rally as equity markets tend to go bullish when more interest rate cuts are on the horizon.
Looking at the technical side of the picture, momentum in markets is beginning to cool off. While buyers are still in control, they’re starting to lose some of their strength which could indicate a possible pullback or reversal to come. As of now, no reason to fret as we see more stocks hitting prices above their longer-term averages, pointing to some bullishness in the market. Small-cap especially is strong as ever and investor sentiment is improving as we shift from the fear seen recently to a more neutral footing.
Economic Releases This Week
Monday: None
Tuesday: U.S. Unemployment Data, October U.S. Retail Sales, S&P Services & Manufacturing PMI
Wednesday: None
Thursday: Consumer Price Index, Initial Jobless Claims
Friday: Consumer Sentiment
Stories to Start the Week
Two students shot and killed at Brown University, Gunman remains at large
Trump’s executive order limits state regulations of artificial intelligence
Bystander hailed as a hero for disarming Sydney gunman
After failure in the Senate, House GOP has its own health care proposal
Potential pushback in Hassett’s candidacy for Fed chair with sources saying his relationship to Trump is too strong
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