This week will be very active, with the Federal Reserve (Fed) meeting for the final time in 2016 and significant economic data releases—all of which will be closely scrutinized given the stock market hitting all time highs.
While the odds of a Fed interest rate increase is almost certain at this point, the language in their press release and post-meeting press conference will receive plenty of attention. The Fed will be looking to strike the right balance on the continued economic improvement, while trying to avoid getting pulled into the changing political landscape in Washington. Stay tuned on Wednesday at 2:00 pm EST to see how this all plays out.
On the economic data front, this is the last full week of meaningful U.S. economic data until the New Year. This week, we get November readings on retail sales, Consumer Price Index (CPI) and industrial production. I expect the data to reinforce the improvement in consumer sentiment and an uptick in inflationary pressure.
So what does all this mean for the markets? Stocks will most likely continue to make new highs as fund flows and repositioning by active managers push prices higher. I expect interest rates to continue to move higher and oil prices to rise. My current opinion is that the market moves we have seen since the election will likely continue until at least Inauguration Day on January 20th. That being said, I am starting to look at the possibility of reducing positions in equities around that time.
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