There is a light economic calendar with a focus on inflation data. This is timely given the growing fear about rising interest rates. While these reports have been benign in recent years, even a modest uptick could fuel concerns. If the focus remains non-political, pundits will be asking: Do rising interest rates signal the beginning of the end for stocks – and the economy?
Last Week Recap
In my last edition of WTWA I anticipated that the punditry would pay little attention to a week chock full of important economic data. That was accurate until Fed Chair Powell’s answers to some questions seemed to indicate a change in Fed policy. I analyzed four key market questions; that should be helpful even though my guess for the week missed the mark.
The Story in One Chart
I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, including commentary on volume. Check it out.
The market declined 1% on the week. The weekly trading range was about 2.6%, much larger than we have recently seen. From a historical perspective, volatility is still low. I summarize actual and implied volatility each week in our Indicator Snapshot section below.
Really?
Suze Orman opines that you need about $5 million to retire early.
Noteworthy
Jeff Desjardins of Visual Capitalist observes that “the world is changing faster than ever before.” This excellent analysis shows eight forces behind global growth, with important details about each trend. (Did you know that there were 100 cities in China with a population over 1 million? One of the charts compares the GDP of Chinese cities with equivalent countries. Fascinating!] Everyone will find something interesting in this article, so sit back and enjoy it. Here are two examples.
The News
Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.
When relevant, I include expectations (E) and the prior reading (P).
The Good
The Bad
As has been the recent case, some of the “bad” news consists of indicators slightly off the best levels.
Fed Chairman Powell’s message about rates being “far from neutral” generated a negative market reaction. Fed authority and leading economist Tim Duy provides great coverage of this story. He writes as follows:
Meanwhile, Federal Reserve Chairman Jerome Powell did a Q&A today. I was not surprised that he maintained the continued “gradual rate hike” mantra. I was surprised when he said “we’re a long way from neutral, probably.” That seemed like it was a bit of a slip. And a hawkish one at that. What seems remarkable to me is that I keep hearing a dovish interpretation of the Fed’s recent disavowal of r-star and the related demise of forward guidance. But what Powell let slip is that he clearly still has an estimate of neutral and we are nowhere near it. That’s hawkish.
Prof. Duy concludes: Bottom Line: You know the bottom line. The US economy is on a roll, and that will induce the Fed to keep adding pressure – gradually – to the brakes.
The Ugly
Investors are indignant about the lack of accountability for financial executives who contributed to the financial crisis. It is part of a trend toward dramatically reduced prosecutions of white-collar and public corruption crimes. (Catherine Rampell, Washington Post).
The Calendar
After last week’s bevy of big reports, this week’s calendar is pretty light. Inflation data will take center stage. The NFIB small business optimism index is also garnering a lot of attention.
Briefing.com has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.
