The week ahead is limited in regards to the release of economic data. Last Friday, we saw the NFP report confirming the worst-case scenario for the United States jobs market. This confirmed that the US now has close to 15% unemployment. This week’s data will most likely point in a similar direction as further jobless claims and retail sales are released.
As it is accustomed, the week starts slowly from an economic data point of view. Rarely is there any important economic news scheduled for Monday.
On Tuesday, the CPI in the United States is forecasted to show a further decline (-0.7%) on a monthly basis, when compared to -0.4% in March. The declining inflation rate is normal, considering that only two weeks ago, the price of oil turned negative for the first time in history.
The Fed’s mandate of price stability and job creation is about to be threatened for the second week in a row. After last week’s terrible job data, this week’s inflation numbers will reflect the difficult situation the Fed faces.
On Wednesday, the Fed’s Chair, Jerome Powell, will participate in a webinar hosted by the Peterson Institute for International Economics. He is scheduled to speak about current economic issues and, more importantly, questions from the audience are expected.
It is normal for the Fed members, even Chairs, to take part in scheduled meetings, webinars, interviews, discussions, during the period between two meetings. They reinforce the recent decisions and messages, making sure the market fully understands the Fed’s point of view.
What Will Powell Say?
The focus will be on any details regarding the quantitative easing programs running in the United States and, more importantly, additional stimulus. It is now clear for everybody to see that the coronavirus health crisis will not go away that easy, and the economic recovery won’t have a V-shape, as initially hoped.
Therefore, any fiscal and monetary stimulus is enough to move the markets. Under such conditions, the Fed should only express its readiness to do everything in its powers, and the market will take it for granted.
Speaking of the market, the DJIA and the S&P500 ended the previous week on a higher note, leaving many investors scratching their heads as whether it has lost touch with reality. However history tells us that bear markets rallies are sharp and aggressive, often stronger than the decline.