Financial Conditions Ease Dramatically in November: What Does it Mean for Stocks?

investing.com:

The Mastercard SpendingPulse data noted that black Friday shopping increased by 2.5% y/y, down sharply from a 12% y/y increase in 2022. When we think about this, adjusted for inflation, that would suggest a decline in Black Friday shopping in real terms, no matter which measure of inflation is used.

While we do not have inflation data for November, the PCE report for October, which is coming this Thursday, is expected to rise by 3.1% y/y and 0.1% m/m in October, down from 3.4% y/y and 0.4% m/m. Core PCE is expected to increase by 0.2% m/m and 3.5% y/y, down from 0.3% m/m and 3.7% y/y in September.

The other metric that will be very important will be the PCE Supercore metric, which was up 4.3% y/y and 0.4% m/m in September.

The market has been losing its focus on inflation, but Jay Powell, who is expected to speak on Friday in a fireside chat, hasn’t. He will also likely be the last Fed Speakers until the December FOMC meeting, as the blackout period begins.

It seems highly likely that he will remind the markets that inflation is still a big concern of the Fed and that he will have no problem doing more and tightening policy further if needed. This could be especially true now that financial conditions have not only eased since the November FOMC meeting but have also given back all of the gains since the September FOMC meeting as measured by the Goldman Sachs Financial Conditions Index.

Financial conditions have eased dramatically over the past 22 days, which is equal to what we would expect to see during periods of rate cutting, such as in 2008 and 2020.

Unfortunately, since the start of 2022, this is not the first time that financial conditions have eased as if a rate-cutting cycle was beginning because similar happened