There has been a lot of speculation in the markets with regard to what the Fed will do (mostly for them to ease much sooner than expected). I don’t think anyone will doubt the 75 bp rate hike coming in November. The Fed won’t go higher than that next week because that will spook the markets into a panic sell-off.
I see them continuing with the 75-point hike next week but then possibly taking the foot off the accelerator (not to be confused with stopping) in December.
A lot of people are expecting a deep recession next year. I don’t expect a “deep” recession until we are in this current economic position without room to cut rates. As long as the Fed can cut rates and purchase bonds, they should be able to kick the can down the road.
Here is what’s in store this week. We get a look into how the economy is doing with respect to housing data, consumer behavior data, inflation numbers, and a view of Q3 GDP.
Tuesday
- US Home Price Index
- Consumer Confidence
Wednesday
Thursday
- Initial and Continuing Jobless Claims
- GDP Q3
Friday
- PCE Price Index
- Real Disposable Income
- Real Consumer Spending
- 5 yr Inflation Expectations
- Pending Home Sales
Chart Check
Last week I mentioned how there may be a relief rally as we compared the chart pattern to one in the recent past. Monday and Tuesday started off playing out exactly how I hoped. However, it quickly turned negative to end the week. You can see how the markets were more focused on retesting and breaking the lows.
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