Home › Market News › CPI, FOMO, and the Debt Crisis
The Economic Calendar:
MONDAY: Wholesale Inventories (9:00a CT), Consumer Inflation Expectations (10:00a CT)
TUESDAY: NFIB Business Optimism Index (5:00a CT), Nonfarm Productivity (7:30a CT), Unit Labor Costs (7:30a CT), Redbook (7:55a CT), WASDE Report (11:00a CT), 3-Year Note Auction (12:00p CT)
WEDNESDAY: MBA Mortgage Applications (6:00a CT), Core Inflation Rate (7:30a CT), CPI (9:00a CT), EIA Petroleum Status Report (9:30a CT), 10-Year Note Auction (12:00p CT), Monthly Budget Statement (1:00p CT)
THURSDAY: Jobless Claims (7:30a CT), PPI (7:30a CT), EIA Natural Gas Report (9:30a CT), 30-Year Bond Auction (12:00p CT), Fed Balance Sheet (3:30p CT)
FRIDAY: Import/Export Prices (7:30a CT), Baker Hughes Rig Count (12:00p CT)
Key Events:
Economists expect that headline and core CPI, which excludes food and energy, rose 0.3% last month.
Stocks have been tearing since the election (not to mention all year). And they appeared to take a breather yesterday. For the week, the S&P 500 was up by +0.87%, and the Nasdaq 100 was up by +3.28%.
The stock market has experienced a significant rally, particularly in recent months. Traders remain optimistic despite lofty valuations and a potential economic growth slowdown.
However, some analysts are expressing concerns about the sustainability of this rally. Goldman Sachs and Bank of America have issued pessimistic 10-year forecasts for the S&P 500, citing historical trends and current valuation levels.
While the market’s performance has been driven by strong earnings growth, it’s important to consider the potential risks associated with high valuations. A sudden shift in market sentiment or a deterioration in economic conditions could lead to a sharp decline in stock prices.
Fear of Missing Out (FOMO) is a powerful psychological force that can lead to impulsive and irrational decision-making. In the world of short-term trading, FOMO can be particularly dangerous, as it can lead to impulsive trades that can quickly erode profits.
When traders see others making quick profits, they may be urged to jump into the market without proper analysis. This can lead to chasing trends, buying at market tops, and selling at market bottoms.
To combat FOMO, it’s essential to:
By understanding the psychological impact of FOMO and implementing effective strategies, traders can make more informed and rational decisions.
The recent release of U.S. economic data, particularly the robust jobs report, has led the Federal Reserve to reconsider the pace of interest rate cuts. The central bank is now leaning towards a more cautious approach, with a 25 basis point cut in December being the most likely outcome.
Markets are now pricing in an 87% chance of a 25bps Fed cut on December 18th, compared to 70% before the data.
Fed Chair Jerome Powell has acknowledged the stronger-than-expected economic performance, particularly in the labor market. This positive outlook suggests that the Fed may have more flexibility to maintain a tighter monetary policy for longer.
While the market initially priced at a more aggressive rate cut, recent economic data has shifted expectations. As a result, investors are now anticipating a more gradual easing of monetary policy. The Fed’s next policy decision on December 18th will clarify the future path of interest rates.
Jerome Powell and Jeff Bezos have both touched on the topic of addressing the debt crisis through economic growth (GDP), although their perspectives and contexts differ:
Jerome Powell View:
During discussions at the DealBook Summit, Federal Reserve Chair Jerome Powell has articulated views on the U.S. national debt, emphasizing that the debt is growing faster than the economy, which he describes as unsustainable.
However, he has suggested that the solution isn’t necessarily to repay the debt but to manage it so that the economy grows faster than the debt. This approach implies controlling the debt-to-GDP ratio by boosting GDP rather than drastically cutting debt.
Powell has also noted in interviews that while the U.S. faces significant fiscal challenges, a fiscal correction spread over several years could prevent a crisis, indicating a focus on sustainable growth rather than immediate austerity measures. His comments reflect a belief that fostering economic growth can alleviate the pressures of a high debt burden over time.
Jeff Bezos View:
During discussions, Bezos has aligned with the idea that the U.S. needs to grow out of its debt problems. This perspective suggests that by enhancing economic activity and GDP growth, the relative burden of the national debt can be reduced without the need for drastic fiscal tightening. Bezos’s approach focuses on economic expansion through entrepreneurship and innovation, which could indirectly support this strategy by creating jobs, increasing productivity, and boosting GDP.
OPEC+ has decided to extend its oil production cuts until April 2025, which initially boosted oil prices.
However, a large sell order from a single bank in early afternoon trading on Wednesday sent prices plummeting. This unexpected event highlights the significant impact that large institutional traders can have on the market.
The person said the large trader sold 4,000 lots of U.S. West Texas Intermediate crude oil futures CL1 in a single block at $69.21 a barrel around 1 p.m. EST (1800 GMT). The buyer then sold the contracts immediately afterward, putting pressure on prices, they added.
While the OPEC+ decision was largely anticipated, the timing and execution of the sell order caused a significant market disruption. It raises questions about how much market rumors and speculation can influence oil prices, particularly in the lead-up to major events.
Geopolitical tensions, particularly in the Middle East, are a significant factor influencing oil prices. The ongoing conflict between Israel and Hamas has added to market uncertainty, as any escalation could disrupt oil supplies from the region.
The weather run on Friday shows that the weather is warming back to above-normal temperatures.
The natural gas market will likely remain volatile in the near term, influenced by weather patterns, economic conditions, and geopolitical factors. As we move towards the winter months, the impact of heating demand and potential supply disruptions will be crucial in determining price trends.
Short-Term Outlook:
Long-Term Outlook:
Source:NOAA
Bitcoin is consolidating at the $100k technical wall.
The crypto market has reacted positively to Paul Atkins’ nomination to lead the Securities and Exchange Commission (SEC). Known for advocating deregulation, Atkins’ appointment is seen as a signal for investors to engage further with cryptocurrencies.
Venture capitalist, All-In podcast host, and crypto maxi David Sacks was also appointed to “White House AI and Crypto Czar.”
David Sacks as AI and Crypto Czar:
President-elect Donald Trump has appointed David O. Sacks, who founded Yammer and was previously the Chief Operating Officer at PayPal, as the “White House AI and Crypto Czar.” Sacks will guide policy development in artificial intelligence and cryptocurrency, aiming to bolster U.S. competitiveness in these fields.
His role includes establishing a legal framework to provide clarity for the cryptocurrency sector in the U.S., which has been a long-standing industry demand for regulatory certainty. Additionally, Sacks will head the Presidential Council of Advisors for Science and Technology, indicating a strategic push towards tech innovation under Trump’s administration.
Paul Atkins’ Nomination to SEC:
Trump has nominated Paul Atkins to be the next SEC Chair, replacing Gary Gensler, who is known for his stringent regulatory approach to cryptocurrency. This shift in leadership is anticipated to create a more crypto-friendly environment, potentially reducing the aggressive regulatory scrutiny that characterized Gensler’s tenure.
Atkins, who previously served as an SEC Commissioner from 2002 to 2008, brings a wealth of experience in financial regulation. His involvement with Patomak Global Partners, where he assesses compliance programs for crypto trading platforms, and his role on the Chamber of Digital Commerce’s board of advisors since 2020 underline his connection to the digital asset space. His work also addresses issues like BSA/AML compliance and cryptocurrency custody, which are pivotal in the crypto regulatory landscape.
The appointments of both Sacks and Atkins reflect Trump’s campaign promises to foster a more supportive regulatory environment for cryptocurrencies, signaling potential changes in how digital assets will be regulated in the U.S. under the new administration.
