By Bill Hornbarger, Chief Investment Officer
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Three Things to Watch
- This will be a very busy week highlighted by the last Federal Open Market Committee meeting of the year. The U.S. Federal Reserve (Fed) is widely expected to leave interest rates unchanged for the third consecutive meeting, and futures are now pricing for the possibility of easier monetary policy by March 2024. Fed and market watchers will pay close attention to the statement, looking for signs from the Fed that it believes its job is done for this cycle. Inflation continues to decline toward the Fed’s target and is likely to finish the year below its target of core personal consumption expenditures (PCE). The latest projection from September showed a year-end forecast of 3.7% (core PCE), which is higher than the latest reading (October) of 3.5%. We expect the rhetoric to remain relatively hawkish.
- Both the Consumer Price Index (CPI) and Producer Price Index (PPI) will be released this week (Tuesday and Wednesday) and are expected to show the effects of lower energy prices. The consensus forecast for CPI is unchanged month-over-month and many forecasters are calling for a decline. The consensus forecast would result in a year-over-year change of 3.1%.
- Outside of the Fed meeting and inflation readings, the economic calendar will feature updates on retail sales and industrial production. Falling gas prices should keep any increases in the index moderate, as the holiday shopping season kicked off with an early Thanksgiving.
Three Things to Know
- In 1971, engineers from the Soviet Union ignited a fire in a gas-filled hole in the Turkmenistan desert. Anticipating that the flames would extinguish within days, they were surprised when the fire continued to burn. Now, 52 years later, this site, known as “The Door to Hell,” is still ablaze. (Source: @fasc1nate)
- The probability of recession (based on the 10-year versus 3-month spread) is at levels seen only two times since 1960. Both ended in severe recessions. (Source @GameofTrades)
- The Fed’s balance sheet is at its lowest level since April 2021, down $1.2 trillion from its peak in April 2022. (Source: @charliebilello)
The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.