Momentum Shift

On Friday, just before the market closed, stocks continued their downward trend, rounding off a difficult week for investors who saw the S&P 500 index fall in four of the week's five trading sessions.

The S&P 500 was down 0.7%, the Dow was down 0.9%, and the Nasdaq was down 0.7% as the closing bell sounded on Wall Street. All three leading indices were in the red. Overall, the S&P 500 lost 3.4% for the week, while the Dow fell by 2.8%. The technology-focused Nasdaq suffered a 4% loss. Well, the S&P 500 and the Dow both saw their most significant weekly drops since late September when they both occurred.?

During Friday's trading session, stocks spent time on both sides of the flatline. Data on producer prices released Friday morning sent futures plummeting, while a more positive signal on consumer confidence lifted markets in the middle of the morning trade.?

The headline reading on producer prices for November showed a rise of 0.3% over the preceding month, while the "core" reading, which excludes the effects of changes in food and energy costs, showed a rise of 0.4%. Increases of 0.2% were forecast for each reading, respectively, according to the economists. The increase in producer prices was 7.4% higher than the previous year.

Where is inflation headed?

If inflation continues to fall at a too-slow pace, there is no reason to believe that the Federal Reserve will become less active in its efforts to raise interest rates. Fed Chairman Jerome Powell recently said that the rate rise at the December meeting scheduled for the next week should be half a percent, which is a decrease from the current trend of three-quarter point hikes.

In addition, there is a possibility that the Federal Reserve will exercise caution and implement rate hikes of a smaller magnitude as demand softens; however, there is also a possibility that the Fed will implement enough rate hikes in 2023 to ultimately bring short-term rates above what is currently anticipated.

On Friday, investors in bonds saw the possibility of this danger. Prior to the release of the inflation statistics, the yield on the two-year Treasury note inched up to 4.328% from 4.257%. This yield serves as a gauge for expectations about the federal funds rate.

New Reforms Coming from the UK

In an effort to stimulate economic expansion, the United Kingdom has announced plans for a comprehensive revamp of its financial system. On Friday, the government of the United Kingdom made a significant announcement about financial regulatory changes, which it believes would revamp EU policies that "choke off growth."

The law that compels banks to segregate their retail operations from their investment arms has been made less strict as part of the package of thirty measures that was just passed. Retail-focused banks would be exempt from this regulation, which was first proposed in response to the Financial Crisis that occurred in 2008.

So, what should we expect from this week?

There are several events that investors should monitor this week. Firstly, the Federal Reserve will start its two-day meeting on Tuesday, and most economists anticipate that by the time the meeting is through on Wednesday, the U.S. central bank will have raised interest rates by half of a percentage point.

The Bank of England, the European Central Bank, and the Swiss National Bank will all make decisions about their respective monetary policies on Thursday.

A new measurement of the consumer price index for the United States is also scheduled to take place on Tuesday. The index is anticipated to have increased by 0.3% in November, according to analysts surveyed by Reuters.

Trading the News…

In all instances, the most agile investors can generate profits regardless of what is occurring around the globe. News trading should be a vital part of your investment plan.

The news often falls into two categories:

·?Periodic: This comprises the periodic or recurring releases of market-moving news, including interest rate announcements by the Federal Reserve, economic data releases, and quarterly earnings reports by firms.

·?Unpredictable or one-time: Examples include a terrorist attack, a sudden geopolitical flare-up, or the possibility of a country defaulting on its debt. As a general rule, unexpected news is more likely to be damaging than positive.

If you need help understanding how to make the unexpected your ally, then feel free to reach out.

Thanks,

Luke Abbott