Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.
After a painful 2022, the stock market officially made it back into bull market territory on Thursday. The S&P 500 is now 20% above the October 12th low. Despite all the fears of collapsing corporate earnings, inflation run amok and geopolitical concerns; the worst-case scenario has not happened. Of course, this does not mean we couldn’t have another bear market, but let’s look at what happens after we mint a new bull. There have been eight bear markets since 1950. Historically, once you see a 20% rally off a recent low, 12-months later not only has the stock market been positive 100% of the time, the median return is an additional 27.3%. That’s the good news. The bad news is that a picture of a bull is featured in the latest Barron's cover story titled, "Don't Fear the Bull Market. Why Stocks Are Headed Higher". Cover stories have been a contrarian indicator in the past.
This week is likely to be one of the most pivotal of the year for global markets - you may want to buckle your seatbelts. We will see a lot of highly anticipated inflation data starting on Tuesday. If the Consumer Price Index (CPI) comes in much hotter than expected, it may put the market’s expectation of no rate hike in jeopardy. By most accounts inflation is cooling. Survey data show that companies have lost much of their pandemic related pricing power, and housing rent growth (largest component of CPI) has slowed dramatically. Thursday will be packed with labor indicators and several metrics that should give us valuable insights on how close we are to the next recession. Remember, while it is clear were not in a recession currently, it usually looks fine until it isn’t.
On top of all the key labor and economic data, the Federal Reserve has a live meeting starting on Wednesday. It is widely believed the Fed will stay on hold this meeting; however, if the inflation data come in surprisingly strong, bonds and stocks may sell off as the Fed will almost certainly feel compelled to keep raising rates.
Data Deck for June 12 –June 16:
|
Date |
Indicator |
Period |
|
Jun 12 |
Federal budget |
May |
|
Jun 13 |
NFIB optimism index |
May |
|
Jun 13 |
Consumer price index |
May |
|
Jun 14 |
Producer price index |
|
|
Jun 14 |
Fed decision on interest-rate policy |
|
|
Jun 15 |
Initial jobless claims |
Jun 10 |
|
Jun 15 |
U.S. retail sales |
May |
|
Jun 15 |
Import price index |
May |
|
Jun 15 |
Empire State manufacturing survey |
May |
|
Jun 15 |
Philadelphia Fed manufacturing survey |
May |
|
Jun 15 |
Industrial production |
May |
|
Jun 15 |
Capacity utilization |
May |
|
Jun 15 |
Business inventories |
Apr |
|
Jun 16 |
Consumer sentiment |
|