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Why Do December 13th & 14th Matter?

The next time the Fed will decide on interest rates is December 14, 2022. What they do will likely have a significant effect on the stock market. In this episode of Coffee with Brendan, Brendan talks about how that might play out and why.

Topics Discussed:

  • Why the Fed adjusts interest rates

  • How a higher interest rate affects the economy

  • How the CPI and PPI figure into the Fed’s decisions

  • Potential outcomes of varying CPI report results


Hi, and welcome to another edition of coffee with Brendan today is going to be a pretty quick one. What we're going to talk about is what is the next day that the market could move pretty dramatically. And that day that you want to circle on your calendar is December 13, 2022. And why is that? Well, as you know, the market and 2022 have been very volatile. And really, it all boils down to a few things. But the biggest thing is what is the Fed going to do? Is it going to raise interest rates? Is it going to lower interest rates? December 13, 2022, is the day before the Fed is scheduled to meet and release and actually potentially increase rates another 0.5%. Now that's what the market has currently as of November 21 has built into itself is that the rate will go up another half a point to go up to go off again at that point.

But how do they make those decisions about whether or not to increase rates because at the end of the day, when the Fed increases rates, as I've talked to a number of clients about when it comes to raising rates, what they're doing is, they're making it more difficult for people to borrow money. So that comes in the form of a consumer, buying cars, buying houses, etc, etc. But also businesses, businesses, a big chunk of what they do is they borrow so you know, not often do they just pay cash to build a new factory or pay cash to upgrade their computer system. Usually, they take out bonds, borrow money, etc. And when interest rates keep going up like they've been going, these companies will scale back some of those, some of those improvements. And that's what slows the economy down. So the Fed is intentionally slowing the economy down to try to get inflation down. How do they make their decisions? There, they spend a lot of time focused on the consumer price index, the CPI, and then also the Producer Price Index, which is the PPI. But on December 13, the CPI consumer price index number comes out. And that will be a huge number, because this past month, and now I will start sharing my screen here this past month.

One second year this past month was November 10. And that is when the CPI report was released. And it showed that as you can see, the forecast was 8%. And it actually came in lower at 7.7%. The market jumped on that news. And similarly in December, there will be a forecast of what the CPI will be. And then there'll be the actual, if the forecast is here, and the CPI number comes in here, the market will be thrilled because that will be two months in a row where inflation is coming down and coming down more aggressively than people forecasts. On the flip side, if the inflation number goes up on December 13, then the market will probably really have a tough day. Because what the expectation will be is that November's reading was a false, a false positive. And so therefore, it may well I don't even want to say what it's going to end up doing. But it would probably be a very bad day, because the expectation would be the Fed still has a lot more work to do. And the Fed will continue to be very aggressive in raising rates. The more they raise rates, the more they put stress on the economy, the more they put stress on the economy, the closer and closer we get to going into a recession. So that December 13 number will be a big number and then the subsequent day when the Fed releases, it's increase. And you know, yes, the 0.5% is built in so that's not going to move the market on that much. It's going to be more what Chairman Powell says after he releases that number, which will move the markets even more than the day before. So it'll be very interesting those two days. You know, usually we know, they actually call it they call it a Santa Claus Rally right around Christmas. Historically speaking, the market actually does pretty well. But this note this December 13th and December 14th dates will be some pretty interesting times to pay attention to the market. So that's all I got for you today little tantalizing.

Fed watching and in date watching for the markets. I hope you have a, this is two days before Thanksgiving or three days before Thanksgiving, so I hope everyone had by the time you see this had a nice Thanksgiving and I look forward to the holiday season. And we'll talk next time, thanks!

Brendan is the Managing Director for Waymark Wealth Management. He has extensive experience in comprehensive wealth management. His focus includes retirement planning, behavioral finance, investment portfolio construction, education funding, insurance & risk management, taxes, charitable giving, and estate planning. Brendan has an ability to take clients' complex visions and distill them down to simple action plans, helping them move from where they are today to where they want to be tomorrow.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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