This week is the week everyone has been waiting for. Stocks and the economy have slumped this week as key inflation data are released, as well as the Federal Open Market Committee’s rate decision and Federal Reserve Chairman Jerome Powell’s press conference. Investors are hopeful that they will finally have a clearer picture of what lies ahead next year.
But with the S&P 500 headed for its biggest annual decline since 2008, stock traders are bracing for more volatility ahead.
This week’s release of the U.S. Consumer Price Index (CPI) is crucial, and any signs of slowing inflation could discourage expectations of more rate hikes and support stocks into the end of the year.
Inflation data has rocked stocks throughout the year, with data compiled by Bloomberg showing the S&P 500 on average moving about 3% in either direction on CPI day over the past six months. The biggest change since 2009. The S&P 500 has fallen seven of the 11 CPI dates this year.
Big Swings
US stocks see 3% move up or down on days when CPI released
Source: Bloomberg
With the FOMC widely expected to raise interest rates by half a percentage point after Wednesday’s meeting, equity investors will be watching Powell’s press conference for any hints on the rate path. Whether or not the FOMC’s US economic outlook and interest rate forecast will change is also a focus.
Of course, global money managers hope the S&P 500 will end the year on a high note after two straight months of gains in October and November. Betting on future market performance is particularly difficult, however, as the stock is on pace for its slowest annual decline since 2018.
“It’s extremely difficult to get the right position right now,” said Eric Listuben, chief investment strategist at Russell Investments. “Until Wall Street is convinced the Fed is nearing the end of rate hikes, monetary policy will weigh on stocks,” he said.
news-rsf-original-reference paywall">Original title:Stock Market’s Defining Moment Arrives With CPI, Fed Decision(excerpt)