Markets

(Washington)

Earlier this week it seemed that the market might finally have a reason to believe the Fed might pause its inexorable march higher in rates. That reason was that inflation had dipped below the Fed’s target. Being just a single occurrence, it was a weak-footed hope. Now, new data shows the American consumer is doing well, as retail sales jumped 0.9% in November. The explanation for the jump is that a drop in gasoline prices helped fuel more retail spending.


FINSUM: Consumers are obviously still feeling comfortable, which will give the Fed a bit of comfort about the stage of the cycle.

(New York)

Investors looking for signs of trouble have no shortage to examine. However, one that might have escaped notice is that small caps are on the brink of a full blown bear market. The Russell 2000 has fallen a whopping 17% since its all-time high close on August 31st. The S&P 500, for comparison, is off 10%.


FINSUM: This is really interesting because it doesn’t make much sense. Both the trade war and the economic situation are more favorable to small caps than their larger peers, yet they are falling more sharply.

(Washington)

The moment many investors have been waiting for (or not, depending on how you look at it) has arrived. Rate hikes finally have a chance to slow after their steady rise over the last couple of years. New inflation data has come in showing weakness. Inflation has now fallen below the Fed’s 2% rate, which means the central bank has cause to pause its rate hikes as the economy looks to be on more fragile footing.


FINSUM: There are two ways to look at this. The first is that it takes some momentum away from the current yield inversion. But on the other hand, it could be an indicator that the economy is headed towards recession.

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