By the end of this week we should have a pretty good idea if Santa Claus is coming to town before year’s end. The reason is that there is a huge run of economic data and at least two central banks will show their hands on rates and how loose they want their monetary policy to be.
Of course, the final insight on Father Christmas’s movements this year will come on December 16 — Wednesday fortnight — when the Fed possibly makes its momentous decision on interest rates. However, what happens this week could determine the US central bank’s move.
The three E’s are always important to where stocks go: earnings, economics and expectations. For the rest of this year, you could throw in a fourth E in the form of the European Central Bank, which reveals its next move to stimulate Europe on December 3.
It’s expected that deposit rates will be cut by 10 basis points, making many deposit offerings coming with a negative interest rate! It will actually cost you money to save!
Draghi once said when he was given the boss of the ECB’s job that he would do “whatever it takes” to get Europe growing, creating jobs and taking the inflation rates higher to more normal levels and a long way from deflation.
This week any shot he fires will be assessed by the world business media and investing community and will either help or hurt Santa’s would be rally.
Over in the US we get to see home sales, manufacturing data, the growth of the services sector and the biggie — the jobs report. The last reading the Yanks received for October was huge and way better than expected.
CNN described it as “A blockbuster month in America for jobs!” There were 271,000 created, killing expectations of a lot lower number and taking unemployment down to 5%, which was the best reading since 2008 and the GFC.
It made many experts argue that the Fed would raise rates in December and, increasingly, they also suggested that stocks would rise when the rise comes, which was at odds to what was once thought.
That job number on Friday will be huge with a capital H!
There will also be a China number on manufacturing on Tuesday but on that day we will be more focused on what the RBA does with rates. No change is the tip but by week’s end it could be a different story.
Monday brings business indicators, the monthly inflation read and loans news. Tuesday, we see the RBA’s statement with their rates decision, home prices, the balance of payments and building approvals.
Then on Wednesday, we see the September economic growth numbers, which could hit the dollar, stocks and our guess on where rates go in February. It needs to be a good number for confidence and to help a Santa Claus rally. And by Friday, we see the October retail figures. This too needs to tell us that our economy is heading up or you’ll be relying on Wall Street and the US to bring us some Christmas cheer.
I’m currently in Abu Dhabi and off to London but I’ll be watching economic data like a Labrador zooms in on a sausage at a barbecue!
I hope I get some sizzling Santa statistics to write home to you about.
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