π§³π¨βπΌ Expect CPI and the Fed to Dominate the Week
Welcome to the Sunday Primer,
Hope you are having a good weekend! This week, we are nervously looking forward to another inflation report (CPI) alongside the Fed meeting the very next day. This report and the subsequent meeting will be crucial in determining what the next year could potentially look like for a lot of us, investing & lifestyle-wise.
Keep an eye out on the YouTube channel toward the end of the week as there is a high likelihood we break down the CPI data and what it means for you and your investments :)
- Humphrey, Rickie & Tim
Market Report
All Eyes on the Labor Market
The U.S. labor market is showing signs of cooling, despite still having more jobs available than workers looking for jobs, with a ratio of 1.7 openings per available worker. The quits rate, which measures the confidence of employees in finding alternative jobs, has fallen slightly from 2.7% to 2.6%. Last week's jobs report showed strong overall employment and wage growth, with 263,000 new jobs added and average hourly earnings increasing by 0.6%.
However, the report also showed a decline in temporary workers and household employment, indicating weakness in the labor market. These factors are expected to keep the Federal Reserve on track to increase interest rates by 50 basis points at its upcoming meeting, but the weak labor market may cause the Fed to halt rate hikes altogether in early 2023.
Forecast Ahead
Consumer Price Index data release (Tuesday, December 13th, 2022)
According to Bank of America, headline CPI is expected to increase by 0.2% MoM and for core CPI to rise by 0.3% MoM. Core goods prices will probably fall again due to high holiday discounts, a weaker holiday shopping spree, and a decline in used car prices. Lastly, itβs interesting to note that rents and ownersβ equivalent rent have been steadily increasing and have shown no signs of slowing down.
Over the past six months, the S&P 500 has seen an average move of about 3% in either direction on the day CPI has been released, according to data compiled by Bloomberg. Thatβs the highest since 2009. The S&P 500 has fallen on seven of the 11 CPI reporting days this year.
Fed Interest Rate Decision (Wednesday, December 14th, 2022)
The Federal Reserve is expected to increase its benchmark interest rate by 50 basis points at its upcoming meeting, lifting rates to their highest level since 2007. The central bank has been rapidly tightening monetary policy in an effort to curb inflation. However, the markets expect rates to peak next year and then quickly retreat, while the Fed expects rates to remain on hold through 2023.
The divergence in expectations between the Fed and the markets might be due to differences in views about the post-pandemic economy and inflation, with markets expecting disinflationary forces to keep prices low and the Fed worried that inflation will be sticky.
Corporate Earnings (Throughout Week)
Monday, December 12, 2022 - Oracle (ORCL), Coupa Software (COUP), JOANN (JOAN)
Wednesday, December 14, 2022 - Lennar (LEN), Trip.com (TCOM), RCI Hospitality (RICK)
Thursday, December 15, 2022 - Adobe (ADBE), Jabil (JBL)
Friday, December 16, 2022 - Accenture (ACN), Darden Restaurants (DRI), Winnebago (WGO)
Message From Fundrise
Looking for a simple way to invest in real estate without having to buy and manage your own property?
Fundrise allows you to invest in real estate without you having to do the heavy lifting yourself. Thatβs why I choose to invest my money through a platform like Fundrise which allows me to partake in real estate returns without having to buy any properties.
How it works: Fundrise has gone and acquired more than 200+ properties worth collectively over 5 Billion Dollars through crowdfunding. They then manage the properties and pass back the profits from real estate activities back to their shareholders. Activities such as rental income, interest income, or acquiring and selling properties that have gone up in value.
Their real estate assets span across different categories such as Apartment Complexes, Single Family Homes, Hotels, and Offices
If you're looking for a short-term investment, this isnβt the best app for you. Fundrise is best for long-term investors who want a simple way to get into real estate.
Average annualized returns after fees have been stellar.
With 5 different plans geared toward different investment sizes, thereβs something for everyone.
If you want to get started with Fundrise, check them out today using our link: fundrise.com/humphreytalks
What We Read Last Week
China Zero-Covid Policy will Shape 2023 Global Inflation (Bloomberg)
Biden Risks 2023 Standoff on Debt as GOP Digs In (Bloomberg)
How AI That Power Chatbots and Search Queries Could Discover New Drugs (WSJ)
Why Investors are Obsessed with the Fed Pivot (Mises Institute)
Inside SpaceXβs lucrative new government satellite program (The Information)