Weaker Retail Numbers and Paris Attack Could Make Fed’s December Decision More Arduous

By C. Jonathan Camarda

CMT®, CPWA®, CFP®, ChFC®, CLU®, CFS®, BCM®

After a furious rebound in October, the global markets have pulled back hard thus far in November. Many feel this was partly due to the Federal Reserve’s whispers about a December hike in rates (stop me if you have heard this one before), which have gotten stronger on the back of the strong employment numbers released in October. However, the retail sector’s profound weakness (not typical for this time of year) is, perhaps, signaling a less-than-stellar economic picture — possibly blackened by the Fed’s “Heads” louder statements about imminent hikes next month. This has caused markets to give up a third of their October gains.

However, with the recent terrorist attacks in France, this may cause more uncertainty for global markets and may — much like China’s bear run in August — cause the Fed to “move the needle” on this rate hike “song” they have been singing. This — in confluence with the third quarter’s low economic output number and decelerating third quarter earnings — may add to the sentiment of a “no go” on rate increases in December. With global economies showing slowing growth and commodities like copper (big indicator of global demand, especially for China) being hit, this may be outweighing the “evidence” that just one good employment number may not be enough to warrant a hawkish move by the Fed.

We will have to see, but the market seems to now view the rate hike as inevitable.

Again, stocks have had a good pullback, in November, after the torrid run up in October’s rebound from August’s correction. However, we could see markets find some ground for holding in and perhaps rising along with oil, which has been hit in November too — especially since they both hit two key, institutionally-relevant, and technical price points of accumulation (attractive buying levels for large institutions). In other words, selling may be overdone and prices may find support for a bounce from these levels. Much is still up in the air (like the golden, autumn leaves) as further direction will surely be dictated by which way the Fed winds blow. Stay tuned.

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