Weekly Market Recap: December 12, 2022

The week in review

• Core wholesale prices (PPI) rose 0.4%, above cons. 0.2%
• Prelim consumer sentiment recovered to 59.1 from 56.8
• ISM Services PMI jumped to 56.5 from 54.4

The week ahead

• CPI
• Retail Sales
• December FOMC Meeting

Thought of the Week

While the labor market is typically the last to turn in an economic cycle, we expect data will soon reflect this softness and signal further moderation in services inflation.

This week, investors will gain further clarity on whether the recent inflation downtrend is sticking and the Fed’s timing on a policy pivot. The November CPI report will be out on Tuesday and market expectations are for a 0.3% increase in both the headline and core measures, which would bring the year-over-year inflation rates to 7.3% and 6.1%, respectively. We expect core goods inflation will continue its decline given further contraction in the Manheim used vehicle index, softening consumer spending on durable goods, easing supply chain constraints and retail discounting during the holiday season. Lower gas and oil prices will also help drive moderation in the headline measure.

However, Powell has highlighted services inflation excluding rent as a key inflation measure for the Fed. While this measure turned negative in October, breaking a long streak of monthly increases, its pathway to normalization will be primarily determined by labor market dynamics. The November jobs report showed a mixed picture of labor market tightness, with hotter-than-expected wages but weakness in the household survey. However, other high-frequency data suggest the labor market is still cooling, with initial jobless claims and layoff announcements rising in recent weeks. While the labor market is typically the last to turn in an economic cycle, we expect data will soon reflect this softness and signal further moderation in services inflation. On Wednesday, the Federal Reserve will conclude its last meeting of the year and we expect they will still slow their pace of rate hikes to 50bps. While they will likely maintain higher-for-longer policy messaging, economic normalization and receding inflation pressures should allow them to pause their tightening program in the first quarter.

—

Originally Posted December 12, 2022 – Weekly Market Recap

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be appropriate for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the
program explores the implications of current economic data and changing market conditions.

The J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature
or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment.

Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

Telephone calls and electronic communications may be monitored and/or recorded.

Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://www.jpmorgan.com/privacy.

This communication is issued in the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission.

If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.

Copyright 2022 JPMorgan Chase & Co. All rights reserved.

^©JPMorgan Chase & Co., December 2022.

Unless otherwise stated, all data is as of December 12, 2022 or as of most recently available.