2024-11-24 11:35:00
Investing.com — The US is to release inflation numbers which will be closely watched as investors try to gauge the future path of Federal Reserve interest rates, while the start of the holiday shopping season and more retail earnings will show how consumer spending is holding up in the face of higher prices. Here’s your look at what’s happening in markets for the week ahead.
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Inflation data
The US is set to release the Personal Consumption Expenditures Price index, the Federal Reserve’s preferred gauge of underlying inflation, on Wednesday.
Economists are expecting the PCE index to have risen annually in October.
While the U.S. is due to release November data on both consumer and producer prices before the Fed’s next meeting on Dec. 17-18 this will be the final PCE report before then.
Recent stubborn inflation data has seen the Fed take a cautious stance towards further interest rate cuts.
Market expectations around whether the Fed will deliver another 25-basis point cut in December or pause are split amid uncertainty over the potential for a rebound in inflation under the incoming Trump administration.
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Black Friday
Investors will get fresh insights into the health of the U.S. consumer and the retail sector in the coming week as Black Friday marks the start of the holiday shopping season, which will likely indicate how shoppers are coping with higher prices.
Earnings results from two major retailers last week gave two very different perspectives. On Tuesday, Walmart (NYSE:) raised its annual sales and profit forecast for the third consecutive time, while Target shares dropped sharply on Wednesday after it forecast holiday-quarter comparable sales and profit below estimates.
A fresh batch of retail earnings are also due in the coming days, with Best Buy (NYSE:), Macy’s (NYSE:), Nordstrom (NYSE:) and Urban Outfitters (NASDAQ:) all due to report.
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Trump trade
The ‘Trump trade’ looks likely to remain a key driver of market activity for now.
Investors who bet on “buy crypto and the dollar, sell foreign assets or green” are still in profit, despite a slight slowdown in momentum. is nearing $100,000, up around 50% since early October, when markets favored a Trump election victory. The has risen 3.6%.
Clean energy, a Trump target, is the worst performer, with iShares’ clean energy ETF down nearly 14%. The Mexican peso has lost more than 4%, while European equities are off around 3%.
However, resistance to Trump-driven trades could increase as concerns about stock valuations grow or geopolitical risks challenge the rally in risk assets.
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Oil prices
Oil prices rose around 1% on Friday, to settle at the highest level in two weeks, as an escalation in the war in Ukraine boosted geopolitical risk premium.
Both crude benchmarks ended the week with gains of about 6% as Moscow stepped up its offensive after Britain and the U.S. allowed Kyiv to strike deeper into Russia with their missiles.
Meanwhile, China, the world’s largest oil importer, announced policy measures to boost trade, including support for energy product imports, amid worries over the incoming Trump administration’s threats to impose tariffs.
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Eurozone inflation
The Eurozone is to release what will be closely watched inflation data on Friday as markets try to gauge the path of European Central Bank monetary policy.
Inflation rebounded to 2% in October after falling below the ECB’s 2% target the prior month.
Data on Friday showed that business activity in the bloc deteriorated sharply this month as the services industry contracted and manufacturing sank deeper into recession.
The ECB has cut rates three times this year and markets are expecting another 25-basis point rate cut in December amid concerns over the economic outlook for the region.
Meanwhile, ratings agency Standard and Poor’s is due to review France’s credit rating after Fitch and Moody recently downgraded their outlooks to negative.
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How might the upcoming PCE index release impact the Federal Reserve’s interest rate decisions?
**Interview with Economic Analyst: Inflation and Consumer Spending Trends**
*Interviewer*: Welcome to our special segment on economic trends. With us today is Dr. Sarah Mitchell, an economic analyst with a focus on inflation and consumer behavior. Dr. Mitchell, thank you for joining us.
*Dr. Mitchell*: Thank you for having me!
*Interviewer*: Let’s dive right in. This week, the U.S. is releasing its Personal Consumption Expenditures (PCE) index, which is the Federal Reserve’s preferred measure of inflation. What can we expect from this release?
*Dr. Mitchell*: The expectations are that the PCE index will show an annual increase, indicating that inflation remains persistent. This data is particularly critical as it will be the last significant inflation measure before the Fed’s next meeting in mid-December, where they will discuss interest rates. Recent trends show that inflation is not easing as quickly as the Fed would like, which could influence their decisions on rate adjustments.
*Interviewer*: How do you see this impacting consumer spending, especially as we enter the holiday shopping season?
*Dr. Mitchell*: The start of the holiday shopping season is crucial for gauging consumer sentiment. Black Friday is just around the corner, and it will provide insights into how consumers are coping with higher prices. For instance, we’ve seen mixed signals from major retailers: Walmart is optimistic, raising its sales forecasts, while Target has slashed its estimates, indicating that some consumers may be more cautious in their spending. This could mean that while some segments are thriving, others are feeling the pinch of inflation more acutely.
*Interviewer*: Speaking of retailers, how do you think the varying performances among them reflect the broader economic climate?
*Dr. Mitchell*: The performances of retailers highlight a duality in the economy. On one hand, companies like Walmart are successfully adapting to current conditions and even thriving, while on the other, retailers like Target are struggling. This divergence can provide a snapshot of consumer confidence; those feeling secure in their financial situations may spend more freely, while those who are anxious might hold back.
*Interviewer*: In addition to inflation and consumer behavior, the political landscape is also shifting, particularly with the incoming Trump administration. How might this affect market sentiment and inflation expectations?
*Dr. Mitchell*: The market is already responding to potential changes under the new administration, often referred to as the ‘Trump trade.’ Investors generally react to expectations of tax cuts and deregulation, which could potentially spur economic activity but may also lead to inflationary pressures if demand picks up too quickly. This creates a complex scenario for the Fed, as they must consider not just current inflation data but also the political climate and its potential impacts.
*Interviewer*: So, with all these factors at play, what’s your advice for investors as they navigate this uncertain landscape?
*Dr. Mitchell*: Keeping a close eye on the upcoming PCE release and subsequent retail earnings will be vital. Diversification remains key; investors should be mindful of sectors that may not perform well in an inflationary environment, such as clean energy, which is currently underperforming. Maintaining flexibility and being prepared to adjust strategies as new data emerges will be crucial for navigating these economic waters.
*Interviewer*: Thank you, Dr. Mitchell, for your insights. It sounds like we are in for an interesting few weeks as we approach the holidays and the next Fed meeting.
*Dr. Mitchell*: Absolutely, it will be a telling period for both the economy and consumer sentiment. Thank you for having me!
*Interviewer*: Thank you for joining us, and that wraps up our discussion on inflation and the upcoming economic indicators. Stay tuned for more updates as the situation develops.
