US stocks may be gearing up to end 2022 on a cheerful note, but not before considering these three important data sets that become available in mid-December. Investors in the stock market will be closely monitoring three important events in December that could shape the markets, at least until the year’s end.
The US CPI data for November 2022 will be released by the Bureau of Labor Statistics on December 13; this is the first significant event. Secondly, the FOMC meets on December 13–14, after which the Fed’s decision on a rate hike is made public on December 14. Finally, the FOMC’s economic projections are released concurrently with its decision to raise interest rates on December 14.
After reaching a high of 8.3% in August, the annual inflation decreased to 8.2% in September and 7.7% in October, respectively. It will be interesting to observe whether the Fed keeps its foot off the brake of the US economy following the November inflation statistics. Considering the backdrop of the Fed’s dot plot, the markets anticipate a 50 basis point rate increase in December.
Powell’s remarks in early November suggested that the Fed is making a concerted effort to prevent a hard landing on the economy. Powell’s message to the market has two components: first, the Fed may think about slowing down the pace of rate hikes; second, the terminal rate may be substantially higher than what the market anticipates.
The US Federal Reserve’s meeting on December 13–14 will be unique and significant for investors in the US stock market. The Federal Open Market Committee (FOMC) will not only decide the magnitude of the rate hike in December, but it will also disclose projections, which increases the significance of the meeting.
Fed’s projections compile projections from Fed members for the most probable developments in real gross domestic product (GDP) growth, the unemployment rate, and inflation for each year from 2022 through 2024 as well as over the longer term. The projections made by the Fed are significant and give the market guidance.
So far, the year-to-date return (YTD) for the S&P 500, the biggest barometer of the US stock market has been disappointing for investors. S&P 500 is down by 15.5 %, while the tech-heavy Nasdaq 100 is lower by nearly 28 % YTD. ac