Folks, if you are a participant in the stock market, there are a few crucial dates that you need to know about. I'm going to go through them one by one and I recommend writing each of them down. Let's go ahead and start with the producer: Price Index This is coming out on December 9th, which is this coming? Friday Last report was 0.2 percent up. Total expectation is another 0.2 percent up.

Now, if you want to see markets get back into rally mode, you'll want to see inflation underperform that expectation so that it gives markets at least something extra to be excited about that isn't already factored in. Remember the PPI The Producer Price Index measures the wholesale prices that businesses are paying. So if you see those prices cooling down, that's good because it either means that business profit margins are increasing or businesses are no longer passing on increased cost to Consumers. Maybe they are even reversing course a bit to sell more inventory or to sell more services.

especially that inventory because we know a lot of inventory is overstocked right now. Next also on Friday we have the University of Michigan Consumer Set Ultimate Index. Update This measures of course, how consumers feel about the economy, business conditions, buying conditions, and so forth. And this is a critical time for this report.

This is absolutely very, very important to watch because this is for a month that included one of the biggest holiday seasons of the year and heading into the final weeks leading up to Christmas. And at the last report, we had some of the lowest consumer confidence that we've had in the last 50 years. The institution concluded that about 60 percent of consumers have already scaled back their spending in response to inflation. Is this trend continuing or are conditions improving? Well, we will get an update on this report Market Expectations right now are showing a pretty Universal expectation that this trend is going to get at least slightly worse.

Next, you have an update on Real household wealth registered on the SAR This is also coming out on Friday Real household wealth declined 21.2 percent in Q3 and this new report will give us some estimates on what we can expect for Q4 Remember, household wealth has a huge huge impact on the overall economy. Powell Was just talking about how labor force participation has dropped because a lot of people that weren't going to retire until later actually retired earlier because during the pandemic, they saw their investment accounts grow so fast. They're like, oh, we're rich, so they're like I'm not going to get back into the workforce. They retired three, four, five, even six years early.

But now all of a sudden we have the opposite problem where we are having wealth destroyed at an unprecedented Pace How's that going to affect career decisions, retirement decisions, and of course, spending decisions. Look at the last 30 years. this is what the current environment has done to household wealth. I Mean you have this massive massive bounce back after the original coveted destruction and now it's all being eroded rapidly.

Rapido Then the next week on Tuesday December 13th you have the November CPR release. The last CPI came in at around 0.4 percent month over month and Core was at 0.3 Expectations according to recent nowcasts are for the overall CPI to come in a little hotter for the November report, 0.47 on the all items overall CPI 0.51 on Core. so both of those hotter than the last report we got which covered October and then for December's report which we'll get in January All item CPI is expected to go back down to just below 0.4 and for core is going to stay the same at about 0.51 But the real question is, will markets be able to stomach inflation picking up month over month? Yes, right now markets are expecting month over month inflation to pick up the pace a little bit. but it's one thing to go from expecting it to actually seen it because when you actually see it, the emotions of the market change to oh no.

Is this the start of a new spiral to the upside? Is this like we've seen the last three four times the FED thought inflation was going to go down and it actually pivoted back to the upside. Inflation pivoted back to the upside. So yes, it's like you can expect the overall trend of inflation to start going down, but when you start seeing those months where it increases again, all of a sudden, you start thinking in the back your mind this might not be so good, this might be something else happening. But on the other hand, I mean expectations are pretty easy to meet.

consumer inflation. expectations for 2023 are now at 5.9 percent, which is a pretty easy standard to meet for an overall year with restrictive interest rates and quantitative tightening and probably a massive bloodbath in the overall economy If you're averaging 0.4 inflation month over month on all items. well, it's only going to take about a year before you average out at below 5.9 percent and then Wednesday December 14th you've got D-Day the next Fomc meeting, and more importantly, the announcement from Jerome Powell Kick Your Wife, Take Your Dog Powell and his thoughts on the trajectory moving forward. Right now it is expected they are going to go with a 50 basis point hike.

However, there is a 23 probability of a 75 basis point hike. If the CPR report that comes out the day prior is hotter than expected, markets are going to start recalculating that 75 basis point hike as a higher probability, but based on what we are seeing right now, it seems that the 50 basis point hike is the most likely. We'll also see a new median Federal Funds rate estimate for 2023, which is expected to be at around 450 to 475, a cut from a terminal rate at somewhere around 5 percent that we should be reaching in March or April maybe at most May And then the day after, we get some Manufacturing Index reports retail sales reports and business inventory reports, which will give us some more well-rounded updates on what we are seeing across the economy. Friday The 16th, we get the U.S Manufacturing and Services PMI You go towards the end of the month and really towards the end of the year and you've got some scattered manufacturing data and inflation reports.

So what is my overall thought process here? Well, if you are someone who is trying to make an argument for a broader Bull Run You need a lot to go right this month. With all of these different catalysts, you need inflation to continue to show signs of slowing, but not too slow to the extent that it means that spending is falling off a cliff and businesses are going to get gutted. Likewise, on the flip of that, you also need spending to be very, very healthy, but not too healthy to the extent that it freaks markets out that inflation is going to pick up again, especially considering that inflation is expected to go up a little bit month over month. If spending is also going up farther and faster than expectations, markets are going to be like wait a second.

Uh oh. And then you also need the FED to look at all these different data sets and conclude that yes, we can continue on a slower hiking trajectory, a slower, quantitative tightening trajectory. So you don't just need the data to all be in your favor and massively in your favor. but you also need the FED to look at that data and suggest.

Interpret that as meaning that the inflation battle is behind us and inflation won't be stubborn. And I know I'm one of the last people saying that inflation is going to be stubborn. but I really don't think that it's going to start plummeting like people think it's going to. I Think like most of the times in history where we've seen this level of inflation, it's probably going to go down.

It's going to cool down, but then you're going to start seeing different areas where it plateaus at highly uncomfortable levels. Which means that this last fed cycle of slowing down might be a bit more messy than people want it to be. So the point? Overall, if you're looking for that Santa Claus rally and the run into early 2023, you do need a lot to go right? Then if you do get all the wins and a lot goes right into 2023, well, then you have that new problem which is earnings, recession Or at least nothing to be excited about, right? Even if the economy isn't falling off a cliff yet, Well, it's like, okay, but companies are slowing down massively quarter over quarter things are getting really, really bad. So without an actual fed, pivot to the downside where they're starting to re-stimulate again.

Where is the growth coming? Where is the excitement coming from? The only thing that people can be excited about are stocks down from all-time Highs But the all-time highs were a completely different Market Environment where policies were much much different and outlooks were much much different because we weren't expecting massively massively historic inflation. So I Don't know folks. I'm in the boat that it's going to get worse before it gets better. but hey, I've been wrong before and maybe I'm wrong again, but this is where I stand and hopefully it broadens your perspective a little bit.

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