MARKET COMMENTARY
As the final trading week of the year commences, investor attention is keenly focused on the potential for a seasonal stock market rally, colloquially known as the “Santa Claus rally.” This week is pivotal, with the release of critical inflation data and unemployment statistics set to provide a clearer picture of the economic landscape. These reports will be the first comprehensive look at the economy post-government shutdown and will help markets assess the justification for the Federal Reserve’s recent preemptive Fed rate cuts. Additionally, forthcoming retail sales data will offer valuable insights into consumer spending during the peak holiday season.
The Federal Reserve’s recent 25-bps rate reduction was executed with incomplete economic data. This week’s reports are expected to fill those gaps and reduce market uncertainty.
• Inflation Outlook: The consensus forecast for the Consumer Price Index (CPI) suggests it will remain within the 3% range observed over the past year. However, it is important to note that the cumulative effect of Fed rate cuts since September could exert upward pressure on inflation, introducing upside risk.
• Unemployment Analysis: The unemployment rate is projected to rise slightly to 4.5% in November from 4.4% in September. A softer labor market could signal to the Fed that further monetary easing is warranted, potentially extending the rate-cutting cycle into next year. Historically, expectations of continued interest rate cuts have been a bullish catalyst for equity markets, reinforcing hopes for a year-end stock market rally.
From a technical standpoint, market momentum shows signs of moderating. Although buying pressure persists, its intensity is waning, which could signal a forthcoming pullback or consolidation.
Despite this, several indicators remain positive. A growing number of stocks are trading above their long-term moving averages, a sign of underlying market breadth and bullishness. The small-cap segment, in particular, continues to demonstrate robust strength. Concurrently, investor sentiment is shifting from a state of fear toward a more neutral position, suggesting a stabilizing market environment as we close out the year.
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
Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.