Market Drama

Welcome to this week’s Market Drama – the first one of the year! 

• Last week, U.S. stocks rallied 1.5% due to the better-than-expected December jobs number. 
• Job growth didn’t decelerate significantly, but wage growth did.
  • The unemployment rate fell to 3.5%, which is the lowest rate for this cycle.
  • Wage growth rose by 0.3% in December, which gives an annualized growth rate of 4.8%.
• The Federal Reserve will keep interest rates high until inflation comes down. Since wage growth is a big driver of inflation, if wage growth decelerates, the market will rally.

What to look forward to this week? 

• On Thursday, we get the core CPI for December. The expectation is for 0.3% month-over-month core CPI and headline CPI (which includes energy and food) of 6.5% year-over-year. 
• If you get lower-than-expected CPI, combined with lower-than-expected wage growth, we could continue to see signs that the market likes what it sees. 

Stay tuned for next week.

– Andres