US: Get ready for the big fall, The year ahead will mostly feature falling market rates, as the Fed peaks out and the market anticipates future rate cuts.

Topics
The Impact of Inflation and Jobless Claims
Indices heavy losses
The policy of the Federal Reserve
Overall Volatility

The Impact of Inflation and Jobless Claims

The curve should dis-invert through the year, and ultimately will steepen out from the front end.
The fall in rates will come from the back end first,
but should later be dominated by falls in front-end rates in the second half.
This is good news for investors and traders who are looking to take advantage of lower interest rates.
U.S. stocks are seen opening higher Thursday,
with the Dow Futures contract up 60 points, or 0.2%, at 07:00 ET (12:00 GMT).
The move comes after sharp losses in the previous session,
as investors await key inflation data and more midterm election results.
Investors are cautious ahead of the release of inflation data for October, which is due out later in the day.
The report is expected to show that consumer prices rose 0.3% last month, after climbing 0.2% in September.
The rise in prices is being driven by increases in costs for housing and healthcare.
However, some analysts believe that the overall trend remains one of the moderate inflationary pressures.

Indices heavy losses

The main stock indices in the US closed with heavy losses on Wednesday
as the outcome of the midterm elections remained unclear.
Although it seemed likely that Republicans would take control of the House,
this did not stop investors from selling off their stocks.
The blue-chip Dow Jones Industrial Average fell over 600 points or 2%,
while the broad-based S&P 500 dropped 2.1%.
The tech-heavy Nasdaq Composite was not spared either, closing 2.5% lower.

Investors were clearly worried about what a Republican-controlled House could mean for future policymaking,
particularly with regard to taxes and regulations.
However, it is worth noting that even if the Democrats had won control of both chambers of Congress,
gridlock would have still been a very real possibility given how divided our politics are right now.

The policy of the Federal Reserve

Inflation data for the United States will be released later this week
and traders are eagerly awaiting the release to see if it provides any clues as to the future monetary policy of the Federal Reserve.

Investors have been worried that the Fed may raise interest rates too quickly in response to inflationary pressures,
which could lead to a sharp slowdown in economic growth.
However, recent comments from Fed officials suggest that they are aware of these concerns and are likely to proceed with caution.

The most important thing for investors to watch in this data release is not just the headline number for inflation,
but also the “core” rate which excludes volatile items like food and energy prices.
If core inflation is rising at a faster pace than overall inflation,
then it suggests that there is more underlying pressure on prices.

Overall Volatility

Away from politics, this week’s inflation data will give us a better idea of how fast interest rates are likely to rise over the coming months. With markets still digesting last week’s surprise announcement by President Trump that he intends to nominate Jerome Powell as the next Chairman of The Federal Reserve,
there is plenty of uncertainty surrounding monetary policy at present.
A clear signal from Thursday’s data would be very welcome indeed.

The cryptocurrency market is in turmoil, with the decision of Binance to back out of the rescue of smaller crypto exchange FTX leaving the latter on the brink of collapse.

This has created a degree of uncertainty among investors and traders.
However, there are still some quarterly earnings to digest,
with fashion retailers Tapestry and Ralph Lauren,
as well as Aurora Cannabis due to report today.
Oil prices have also retreated on concerns for demand growth from China as cases surge and U.S. crude oil inventories rise.
U.S. crude oil stockpiles unexpectedly rose last week,
according to data from the Energy Information Administration Wednesday,
taking inventories to their highest since July 2021.

The bulk of this increase, however, could be put down to a roughly 3.5M barrel draw down from the Strategic Petroleum Reserve.
Prices have dropped sharply as a result with Brent falling more than 6% so far this week and WTI more than 7%.
Gold futures have also fallen 0.1% on the news.

US: Get ready for the big fall

Related Topics