Market Minute with Kenny Polcari: Dec. 19, 2022
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| By Kenny Polcari |
Before we get into what’s happening this second-to-last week of 2022, let’s talk about how we had …
One Heck of a Week Last Week
Between the Federal Reserve on Wednesday and the global central banks all making policy statements on Thursday, the markets were sent into a tailspin.
Fed Chair Jerome Powell didn’t actually say anything new. He told us what we were expecting to hear and raised interest rates by the expected 50 basis points. Additionally, he promised another raise in February and March of 2023 until we get to the terminal rate between 4.75%-5.25%.
However, the Fed’s Dot Plot — a chart that records each Fed official’s projection for the central bank’s key short-term interest rate — shows that there’s more of a leaning toward even a higher terminal rate in 2023 than what we are expecting, which is what sent markets into a bit of a panic, especially when Powell did not turn dovish at all during the Federal Open Market Committee meeting.
In fact, he held the line, he had a backbone, he remained hawkish and said we are not done yet and nor are we close. Then, we heard the same message on Thursday from European Central Bank President Christine Lagarde, who was very clear in saying that the ECB is also committed to continued rate hikes and indeed, raised their rates by 50 basis points.
Lagarde also promised more 50-basis-point moves in the new year, very much following the Powell narrative. So, it’s no wonder that stocks took a beating across the board and ended lower on Thursday and Friday as it became clear to investors that neither the Fed nor the ECB are going to turn dovish or pivot in 2023. The earliest that we can expect the Fed to pivot is in 2024, yet no specific timeline was given as to when that will happen.
And finally, this all brings us to …
The Week Ahead
This week is chock full of data, but the most important piece of data is going to be the Personal Consumption Expenditure Deflator, which just so happens to be the Fed’s favorite inflation gauge.
If the PCE Deflator is anything like the Producer Price Index and the Consumer Price Index, then it’s also expected to be lower.
In addition, we’re going to get housing starts data, building permits and existing home sales — all expected to be lower. We’re also going to get the final read on the third quarter GDP, expected to be 2.9%, which should be unchanged from last month’s reading.
Find out more details about this week’s data points and what the market’s tone is going to be going into this week all down below:
Click here to get my rundown and be sure to check your inboxes tomorrow for the next installment of my weekly video interview series, Wealth & Wisdom.
To your Wealth & Wisdom,
Kenny Polcari
Host
