18 May 2024
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Silly season looms but serious stuff happens for stocks & rates this week so keep your eyes wide open!

Peter Switzer
11 December 2023

Christmas is coming and I guess the ducks are getting fat, but who’ll put a good data drop in the stock players’ hats? Sorry, but this is the silly season, so cut me some slack! However, what follows is a lot more serious for this great bounce back for stocks.

A few weeks ago, I said all that I want for Christmas was a stock market rally. So far, we’ve had a nice start to one. But now we need economic data readings to give the big market influencers reason to believe that inflation is set to keep falling nicely in the US and Australia, and that both economies should see rate cuts next year.

This week is a really important one for data drops. They have implications for inflation as well as interest rates so let’s see what’s ahead and what we should hope for, if you prefer stock prices to rise. So here goes:

  1. Tuesday: The Consumer Confidence number comes out. We need it to show that the RBA’s reign of ‘terror’ with interest rates has really hurt consumers.
  2. Tuesday: The number NAB business survey is revealed and we need to see both business confidence and conditions have been hit by the 13 rate rises.
  3. Thursday: It’s the jobs report! If you want no further rate rises, hope for a rise in the unemployment rate from the latest 3.7% reading. A fall in jobs created would be a negative for job seekers but a plus for interest rate worriers.
  4. Friday: The Purchasing Managers survey will hopefully show less purchasing, but not so little that it suggests we should start worrying about a serious slowdown.

That’s the local data drama covered. What about the OS stories:

  1. Tuesday (US time) and the CPI needs to show that inflation is still on the slide. If it doesn’t, stock prices will fall on another Fed rate rise!
  2. Wednesday: The US Fed decides on interest rates and every man and woman, including Donald Trump’s dog, would be expecting no rise! (Producer Prices also are on show but they’re less worrying.)
  • Thursday: It’s US retail sales time and I’m hoping for a subdued “don’t shop ‘til you drop” American consumer. But we don’t want the number to scream “there’s a recession coming!”
  • Friday: The Yanks have industrial production statistics that shouldn’t be a worry, unless they drop so badly that it implies a recession could be worth worrying about. Plus, we see China’s monthly economic indicators and I’m hoping for better-than-expected readings here, so if the RBA has hurt the economy with its 13 rate rises, China will provide demand that helps our overall economy to avoid a recession.

Also, a stronger China buys iron ore and keeps iron prices elevated and this feeds into the Budget via higher taxes.

By the way, sometime this week we’ll see the Federal Mid-Year Budget Update (it’s called MYEFO) and I suspect we’ll see that the Albanese Government will have a big surplus. They’ll need to use this in the May Budget next year ahead of the 2025 election in order to win friends and influence voters, given what recent popularity polls have been reporting!

That big surplus would be Albo’s greatest Christmas wish, as he needs to spend a lot in 2024 to win many voters back after a shocker in 2023.

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