Global Highlights This Week: Fed’s Favorite Inflation Indicator to Be Released, Investors Focus on Subsequent Easing Pace
The Federal Reserve’s rate cut has boosted investor optimism, with US stocks closing at record highs last week. They anticipate further rate cuts, sustaining the market rally.
The S&P 500 hit a new high again on Friday, up over 13% year-to-date. Traders now expect additional cuts in October and December, with the Fed hinting at further rate reductions to support a weakening labor market.
Analysts note that rate cuts could benefit interest-rate-sensitive sectors, including small-cap stocks and non-essential consumer goods. If easing policies lead to lower mortgage rates and stronger economic activity, homebuilder stocks could also gain, revitalizing the sluggish real estate market.
Liz Thomas, investment strategy head at SoFi, said, “Last week’s market theme was clear: we got a rate cut, and more are coming. The market’s pleased, and we’re back in a rate-cut-driven rally.”
Looking ahead to this week, the economic data spotlight will be on August PCE inflation figures—the Fed’s preferred inflation gauge. Markets will assess whether tariffs have driven up prices; if signs suggest limited impact, it could clear the way for more cuts.
Fed Governor Stephen Milan, speaking publicly on monetary policy for the first time on Friday, emphasized that Trump’s broad tariffs haven’t fueled inflation, arguing for swift, significant rate cuts to prevent further labor market deterioration.
Milan plans to address the New York Economic Club on Monday, systematically outlining his economic views and “thoroughly explaining the logic and calculations behind the data.”
Beyond Milan, other FOMC voters will speak frequently, likely stirring global financial markets.
With prior data showing a worsening US labor market, markets are also watching for more signs of sustained economic weakness. Key data releases on Thursday include August durable goods orders, Q2 GDP annualized final reading, and weekly initial jobless claims—worsening figures could reinforce “recession trades.”
Seth Basham, head of stock research at Wedbush, noted in a report that with the Fed stressing its policy path isn’t preset and internal disagreement on rates, upcoming economic data—especially on labor and inflation—could spark market volatility.
On earnings, only a few companies like Micron Technology, Costco, and Accenture deserve attention. Some investors await the start of Q3 earnings to gauge the impact of tariffs and a slowing job market on US firms.
Meanwhile, global geopolitical risks are heating up—signs of Russia-NATO conflict, Israel’s military moves in the Middle East, and shaky governments in Japan and France—but market pricing of these risks remains low. Short-term shocks are often offset by liquidity and policy support. Yet, with high valuations, a spike in energy prices or sovereign debt turmoil could quickly reverse optimism.
“Geopolitical risks are barely priced into stocks,” said Goldman strategist Guillaume Jaisson. “US valuations are at rare highs, and European markets aren’t cheap either. If uncertainty rises, we expect a shift from ‘bad news is good news’ to ‘bad news is bad news.’”
Key Events This Week Overview
Monday: China’s 1-year loan prime rate to September 22, Eurozone September consumer confidence index preliminary, RBA Governor Bullock testifies at the House Economics Standing Committee, State Council press conference, New York Fed President Williams on monetary policy and outlook, St. Louis Fed President Musalem on US economic prospects and policy.
Tuesday: Eurozone September manufacturing PMI preliminary, UK September manufacturing PMI preliminary, US Q2 current account, US September S&P Global manufacturing PMI preliminary, US September Richmond Fed manufacturing index, Cleveland Fed President Hamark on the US economy, Richmond Fed President Barkin on economic conditions, Swedish Riksbank interest rate decision and monetary policy report, HarmonyOS autumn product launch, Atlanta Fed President Bostic on economic outlook.
Wednesday: US weekly API crude oil inventories to September 19, Australia August weighted CPI year-on-year, Germany September IFO business climate index, Switzerland September ZEW investor confidence index, US August new home sales annualized, US weekly EIA crude oil inventories to September 19, US weekly EIA strategic petroleum reserve inventories to September 19, Bank of Canada Governor Macklem speaks.
Thursday: Germany October GfK consumer confidence index, Switzerland central bank policy rate to September 25, US weekly initial jobless claims to September 20, US Q2 real GDP annualized final, US August durable goods orders month-on-month, US August existing home sales annualized, US Q2 core PCE price index annualized final, US weekly EIA natural gas inventories to September 19, San Francisco Fed President Daly speaks, Chicago Fed President Goolsbee speaks, New York Fed President Williams gives welcome remarks at the fourth annual conference on the international role of the dollar.
Friday: Canada July GDP month-on-month, US August core PCE price index year-on-year, US August personal spending month-on-month, US August core PCE price index month-on-month, US September University of Michigan consumer confidence final, US September 1-year inflation expectations final, Fed Governor Bowman speaks.