🚀Consumer spending critical for the longevity of bull market🚀

Inflation has not deterred consumers from feeling miserable. There is genuine concern that the high inflation expectation may crystallise into weaker economic growth. One could point to the Consumer Sentiments from the University of Michigan, which showed a fall in early November, the lowest level in a decade.

Examining the figures revealed a more worrisome trend. About 25% of US households see potential deterioration in their financial situation, the highest level since 2008. More importantly, 50% of the respondents felt that the economy had recently weakened and could continue in a downward trend next year. Surprisingly, 60% of consumers thought difficult financial situations would likely remain for the next 5 years.

Goldman Sachs economists had predicted that the fall in the sentiments could translate to a 0.4% decline in fourth-quarter consumption growth, which is the driver of the bulk of the GDP. In addition, while October sales have been rosy, there is an assumption that consumers are shopping early for their needs, which may contribute to a weaker retail sales reading ahead.

Central bankers are generally worried that consumers might accelerate their spending in anticipation of higher prices. If we see actual price shaping inflation expectations, the actual inflation figure may drive higher, leading to a self-fulfilling prophecy. However, a sign of comfort is that inflation expectation maintains at 2.9%, based on the Michigan survey. This implies that consumers believe in the transitory inflation narrative and trust that the price increase will likely moderate next year.

As the inflation scare is back into the game, Pika World will observe the trends and their implication on corporate earnings and the resultant outlook for the equity market.

⏰All eyes on the Fed Chair Nomination🎙

As we move closer to Thanksgiving Day, there is growing anticipation on who will be the next Fed chairman. However, the week is a quiet one given that the market is closed on Thursday for Thanksgiving, followed by a half trading day on Friday.

While we expect many economic data to be released, including jobless claims, FOMC policy committee meeting minutes, and core personal consumption expenditure data, the main highlight is still the Fed chair candidate.

It is heartening to see our favourite Uncle Powell being chosen as the Fed Chairman for another term. This certainty provides comfort for the market.

📮What’s on the menu today?

At 10.45 pm, we will have the Manufacturing PMI (Nov), which stands at 59.0, up from 58.4. Likewise, service PMI is expected to rise to 59.0 from 58.4 in the prior period.

It is 23 Nov, Tuesday, at 8.10 am in Singapore and 8.10 pm in New York. It has been a great start to the week, and we hope all Pika World friends a prosperous week ahead!