It’s the week before Christmas. The macro-policy docket isn’t exactly sparse, but interest and engagement with economic releases and market events will be limited by their proximity to the highest of Western holidays.
If you’re making a list (and checking it twice), the Bank of Japan is at the top of it. Earlier this month, remarks from Kazuo Ueda and, more importantly, a speech by deputy Ryozo Himino, fanned speculation that the bank is planning a possibly imminent exit from negative rates. “Imminent” is probably a relative term.
Since taking the reins from Haruhiko Kuroda, Ueda tweaked the parameters around the bank’s yield-curve control program twice, with the last such adjustment (at the October meeting) widely viewed as a tacit acknowledgment that the framework, in any form, is anachronistic. Still, a rate hike at this week’s BoJ gathering was viewed more as a tail risk than anything else. According to various media reports, the bank saw no urgency to make significant changes to policy before the end of 2023.
In the US, anyone who bothers to tune in will be treated to a bevy of housing data, starting with builder sentiment on Monday, and continuing with starts and permits (Tuesday), existing home sales (Wednesday) and new home sales (Friday). If nothing else, the reports will merit mention for the extent to which they capture a multi-week period during which mortgage rates fell dramatically. After a multi-month increase to new 23-year highs. Suffice to say it’s been a roller coaster.
From the highs in October near 8%, the 30-year fixed dropped precipitously courtesy of a mind-bending rally at the long-end of the US Treasury curve. Freddie Mac’s weekly updated sported a six-handle for the first time since August 10.
Builder sentiment is looking for its first monthly increase in five, and existing home sales are expected to post yet another decline, the 20th in 22 months.
Also on deck in the US: Personal income and spending data for the world’s largest economy, including an update on PCE prices. Personal spending is expected to show a 0.3% increase, comparable to last week’s upside retail sales surprise.
At this point, whether good news is bad news on the US macro front is in the eye of the beholder. I’m not feeling especially charitable today: Bears change their story depending on the data. If the data’s constructive, it’s a hawkish signal for the Fed, which means you should sell. If the data’s soft, it’s a recession canary which likewise means you should sell. If you listened to that crowd, you’re now poorer for it. (Womp womp.)
The PCE price updates will be eyed closely, both in relation to November’s mixed CPI report and particularly in the context of the Fed’s much-maligned dovish pivot. Consensus is looking for 0.2% from the MoM core print.
If the PCE inflation readings come in even a touch warmer than expected, Fed critics will take the opportunity to exhibit more in the way of righteous indignation at what they swear is a perilously premature policy pivot. Or maybe they won’t. Because the data is scheduled for the last trading session prior to the long Christmas weekend. So, in all likelihood, most detractors will be too busy snacking on shards of calcified ham glaze and mainlining eggnog to pretend to be concerned about the Fed funds rate.
The final read on Q3 GDP is also due this week, as is Conference Board consumer confidence. As a quick reminder, the preliminary read on University of Michigan sentiment for December suggested Americans were feeling demonstrably better about things early this month. The final read on Michigan sentiment is due Friday.
Also of note: UK inflation data and Ifo in Germany. Those updates will be contextualized by last week’s BoE and ECB meetings at which policymakers tried (mostly in vain) to dissuade markets from pricing a quick pivot to rate cuts.
I’m pretty sure those who follow the right wing “media” prefer their ham and eggnog on the extreme bitter side…
H, et al., I watched 12 Angry Men, enjoyed it (and the old actors) thoroughly, it’s definitely stood the test of time well given its 1957 origin… now back to streaming Elf 24/7…cheers, and holiday well wishes to all…
12 Angry Men one of the all time greats, it doesn’t get old.
I once created a one off seminar for a group of honor students based entirely on a group of movies illustrating various key points of management and group behavior. High on the list were “Twelve Angry Men” and “12 O’Clock High.” I also included “Tin Men,” “Big Kahuna,” “Glengary, Glen Ross,” “Other Peoples Money,” “The Man in he Grey Flannel Suit,” and several others. None of them get old.
It wasn’t until this year that I decided to try egg nog and realized I was missing out. It always sounded gross to me, but after trying it for the first time, I plan to make my own batch to enjoy this year. If anyone has any good recipes, send them my way!
As for the housing market and mortgage rates, I expert fireworks once we get in the 5% range. My inclination is that we’ll see the everything rally make its way back into the housing market once that happens, but part of me thinks I might end up underestimating the supply that might hit the market once homeowners see an opportunity to make a long awaited move. Then again, those sellers also become buyers which makes me think we will see some big gains in housing prices as the sellers roll over their recent equity gains.
If I had to place a bet, I’d say it’s more likely we see another major move up in housing prices once rates go back to 5%, which I expect will happen in 2024.