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Heroes Of The Last War
Effectively, last week was the final week of 2022 from the market's perspective. The US CPI report and the December FOMC meeting were the last of this year's event risks, and considering how arduous 2022 was, most will be glad to close the books and flip the calendar.
But the data docket isn't blank in the US ahead of Christmas. Mercifully for holiday loners like myself, opportunities to editorialize abound.
The headliner is November personal income and spending accompanied, of course, by the
It boils down to the market thinking that inflation and growth is slowing faster than the fomc does. We will see. My bet is the market is right. The fomc wants to make sure inflation is tamed. The market is no longer worried about this event nearly as much.
To me the difference of opinion here is that the FOMC (Powell?) wants 2% back as soon as it (he) can get it and it won’t back off until it gets its way. IMO, the market mainly doesn’t agree with the goal. They like 3% just as well as 2% and see less pain. Like everything else now, neither side is likely to back off … after all some very big faces are at stake.
Conversely, the more the markets (especially equities) ignore the Fed’s narrative the more the Fed is forced to follow through, which what will likely be the cause of the next major down turn second half of 2023.
Powell is careening towards his own personal Kuroda moment, with the juxtaposition that they’re on opposite sides of the dove-hawk continuum. If only there were a word for that…