Stocks look to be on their way to record highs once more as we enter the final month of the year. The about turn in the chances of a quarter point Fed rate cut in the last couple of weeks has been brought about by recent Fedspeak which has pointed to policymakers pulling the trigger in a few weeks and seemingly asking questions later. That comes amid near 3% GDP growth and has boosted risk sentiment while overriding any lingering concerns about an AI bubble, stretched positioning and valuations.
Markets are getting back into the swing of economic data releases again, though the first Friday of a new month will not bring the monthly US non-farm payrolls report. Both the October and November employment releases have been pushed back until 16 December, which is six days after the final FOMC meeting of the year. We are now in the Fed blackout period so won’t be hearing from any Fed officials in what has appeared to be a very mixed set of views across the Committee. Markets’ current 85% chance of a December cut could be tested by some the jobs data we get to see this week, with ISM, ADP and initial jobless claims all of interest. The ADP number could see a drop in employment if it follows the weekly trend.
December has traditionally been a month where the dollar tends to see broad-based selling pressure. Seasonality data points to the greenback weakening in near 70% of Decembers due to repatriation of profits and conversion of US-based revenues. This could intensify this year with US stocks markets attracting record foreign portfolio inflows this year. Â The Dollar Index has moved below its 200-day SMA and a near-term upward trendline from the September low but is sat on a long-term low from July 2023.