The biggest worry is the unfolding of Trump policies

Incoming data is going to be more important than ever for the Fed and can easily be the excuse for the Fed to go on hold at the January meeting. This is clearly what the market expects, with 96.3% betting on no change, according to the CME FedWAtch tool. The meeting is scheduled for Jan 29. We don’t get the next PCE until Jan 31.  The Fed can legitimately say it’s waiting for more data.

Today we get the usual Thursday jobless claims and tomorrow a bunch of inventory releases, but no notable market-movers. The Santa Claus rally is using up all the oxygen. We will soon get the data on holiday shopping, with all that implies for consumer confidence. So far we have Mastercard SpendingPulse, showing spending rose 3.8% between Nov 1 and Dec 24. And savvy shoppers are still waiting for the Jan sales.

The biggest worry is the unfolding of Trump policies in the next week as the crescendo builds to inauguration day and Day 1. Remember Trump said he would end the Ukraine war on Day 1, a huge worry for the Ukrainians, but Mr. Putin is standing back. Let’s just note that if the war really is ended, sanctions on Russia can be lifted not that long afterwards and presumably the price of oil can fall some more.

A background worry is a cyber-attack on a Japanese airline. We suspect many more cyber-attacks are occurring that we don’t hear about. We have brutal terrorism and war killings in various places (Pakistan attacked the Taliban—huh?). but cyber is the new war.

Forecast: As expected, the euro/dollar is stuck in the mud and because the next holiday, New Year’s day, comes next Wednesday, we may have to wait until a whole week for the new year and something interesting. Normally we would expect the big names to pare positions before then, meaning the euro could actually get a rise by default. The last time we had a bounce, it rose above the 200-day. This time the 200-day lies at 1.0483. The max is presumably the B band top at 1.0556—the worst-case scenario.

Political tidbit: Most year-end commentary is not worth the time and energy. But we like his chart from Bloomberg. No further comment necessary. 

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