The Numbers to Watch Next Week

After a busy week that saw Trump win the presidency and market participants frantically adjusting portfolio positioning, it is time to return to fundamentals.

Next week, I will be laser-focused on the crucial economic indicators of Inflation and Retail Sales, providing valuable insights into the market's future trajectory.

Inflation:

On the inflation front, I urge my followers to focus on the Core measure, which strips out food and energy prices, rather than the Headline Inflation that media outlets often highlight. The Core measure is the key indicator, with CPI forecast to have risen 3.3% over last year in October, unchanged from September's increase. The Street expects the Monthly core price to increase 0.3%, also in line with the September gain.

It is delusional to expect core inflation to go back down to 2% any time soon. On the contrary, inflation could pick up steam in 2025. Monetary policy has already started to ease, and fiscal policy might join the party next year.

With easing financial conditions, it is difficult to imagine that the US consumer will cut spending anytime soon. On the contrary, I think we might see a re-acceleration.

The final monthly retail sales report before the initiation of the holiday shopping season is scheduled for release on Thursday. Economists project that retail sales increased by 0.3% compared to the previous month in October. Additionally, the control group of retail sales, which excludes several volatile categories such as gasoline and directly impacts gross domestic product (GDP), is also anticipated to have risen by 0.3%.

Markets Outlook:

Looking at markets, I will continue to hold my overweight position on Small Cap, Energy, and value-oriented stocks; on the other hand, I have moved my international stocks allocation to underweight. I think hot money to come into the US Markets for some more weeks, and I expect both Developed and Emerging Market equities to get punished heavily.

That said, I caution that we might reach the peak of the downturn for international equities by the end of December. At that point, it could be a strategic move to consider re-entering the market.

I continue to avoid long-duration treasuries, and I expect Bitcoin and Precious Metals to continue rallying.

We might retest 5% yields in the US at the 10-year tenor next year. I will only consider adding some exposure to treasuries if our Politicians devise a solid plan to cut spending, which is a remote possibility.