By tomorrow, stocks will be surging or diving. This will hinge on inflation data out of the US overnight. And it comes as we take on board a raft of conflicting news about the economy.

Despite a plethora of good news about the economy now, there’s a truckload of experts who want to talk down 2023, with ANZ’s CEO warning that there’s a lot of Australians who’ll lose their fixed rate home loan next year and “a chunk of money” when they move to 5% plus mortgage rates.

Meanwhile, an investment conference in Sydney predicted a 15-20% fall in house prices next year but REA.com.au economists think it will be more like 10-15%.

Despite all this pending doom in 2023, retailer research expects a big booming Christmas as our high savings from the pandemic lockdown meets ridiculously high airfares for overseas travel, which is tipped to turn into a $64 billion sales for local shopkeepers.

Meanwhile, financial markets have to worry about Putin’s war, Xi Jinping’s desire to take back Taiwan, Rocket Boy in North Korea and Saudi Arabia’s and OPEC’s  desire to make money out of these concerns by cutting oil production.

Then there’s the bigger hip pocket threat of inflation and what the US Fed and other central banks do with interest rate hikes.

All these headwinds explain why the US stock market is down 25% this year and our stock market is off 12.4%, while the bond market is having the worst year since 1926!

We’re in a perfect storm for financial markets and need a break to turnaround sentiment. That could happen tonight but realistically it could be two months too early for inflation to fall so significantly in the US that it will turn a share market sell-off into a risk on buy-the-market situation.

The irony is that right now bank bosses think the economy is humming. We need it to ‘de-hum’ to bring inflation down and cancel out too many rate rises going forward.

In the Daily Tele today, the ANZ chief executive Shayne Elliott said “Australians are the wealthiest and healthiest they have ever been despite the threat of rising interest rates, inflation and recession.”

At a CEDA business lunch in Brisbane, Mr Elliott said conditions in the Australian economy “were about as good as they get”, with high savings and low debt stress coming out of the Covid-19 pandemic. “If we were to start from scratch and design a world, we could probably not do any better,” said Mr Elliott. “Simply put, Australians have never been wealthier, they have never had more liquid assets, never been healthier or more employed.”

Elliott liked the following about our economy:

1. Debt was manageable.

2. Australian mortgage holders behind in repayments was sitting at 0.7%, 35% lower than the historical average.

3. Jobs are plentiful.

4. Job holders are being paid well.

5. They’re getting the hours they want.

That said, he did warn Australians to be prepared for changing circumstances ahead and to plan for those changes.

Ultimately, if inflation can be beaten and interest rates don’t rise much more here, and in the US in particular, the forecasted negatives for 2023 might end up being less of a threat to stock prices and the economy.

That’s why the inflation data out tonight in the US will be watched by millions of market players around the world. What’s revealed will spark big buying or selling. I’m hoping for buying!