📉 Home stretch

Plus: China's vibe shift | Monday, December 12, 2022

Open in app View in browser   Presented By Walmart   Axios Markets By Matt Phillips and Emily Peck · Dec 12, 2022 Happy Monday. As the typically sleepy holiday season hoves into view, this week includes some of the biggest remaining market events of 2022. Today's newsletter is 691 words, a 3-minute read.     1 big thing: Twin forces dominating 2022 Illustration: Shoshana Gordon/Axios   Sturm and Drang. Yin and Yang. Inflation and the Fed. The twin forces that dominated markets this year are about to have a big week, Matt writes. What's happening: Consumer Price Index data is out tomorrow at 8:30am ET, and the Fed's final rate decision of the year hits Wednesday afternoon. Why it matters: Both events have the potential to generate big market moves, which could make this horrible year look significantly better, or worse, going into the final stretch of trading in 2022. The big picture: Look at your 401(k) statement! Or maybe don't! Uncomfortably high inflation and the Fed's effort to wrest it under control with sharp interest rate hikes clobbered the markets this year. Even after a recent rebound the S&P 500 is down roughly 17%, on pace for its worst year since 2008. The U.S. bond market — as measured by the Bloomberg U.S. aggregate index — is having its worst year on record stretching back to 1977, falling more than 13%. State of play: The November CPI report is expected to show that the pace of price increases slowed, with the annual rate of inflation falling to 7.3%, from 7.7% in October, per estimates published by FactSet. A lower-than-expected October CPI print last month kicked off a massive reaction: The S&P 500 climbed 5.5% on Nov. 10 in its best one-day gain since 2020. Meanwhile, Fed watchers think the central bank will only raise by half a percentage point on Wednesday — marking a slowdown after four straight increases of three-quarters of a point. Between the lines: With markets fairly certain that the slowdown in rate hikes will begin, investors will be looking for any indication that plans to pause increases altogether could be coming into view. On this point, economists will be watching the Fed's official statement to see whether it continues to include the phrase "ongoing increases in the target range will be appropriate" — and if it doesn't, that suggests that we might be nearing the end of the rate-hiking cycle. That could generate a big relief rally in both stocks and bonds. The bottom line: With less than a month left in an awful 2022, the fate of the markets remains all about the Fed and inflation.     2. Charted: A tough 2022 Data: FactSet; Chart: Axios Visuals They're not the charts you want to see as the investing year closes. The markets have suffered mightily because of rising inflation and the Fed's effort to curtail price growth with interest rate hikes. State of play: The central bank's rate-hiking campaign has hammered stocks and bonds alike — meaning that even diversified portfolios are having one of the worst years on record.     3. Catch up quick 🇬🇧 The British economy is contracting. (AP) ✨ Microsoft buys nearly 4% stake in London Stock Exchange. (CNBC) 🚨 U.S. scientists produce fusion energy breakthrough. (FT)     A message from Walmart Walmart helps families save on the things they need most     Over 37 million Americans have diabetes. With Walmart, they can save up to 75% compared to the cash price of branded insulin. This adds up to more than $15 million saved across America since June 2021. Learn more about how Walmart helps families live better.     4. China's confidence slumps Data: Morning Consult; Chart: Axios Visuals The wave of dissatisfaction visible in the demonstrations across China in recent weeks is also showing up in polling data, Axios' Felix Salmon writes. Why it matters: Chinese confidence during the pandemic was one of the big economic forces continuing to drive the global economy forward. Now it's slumping, and it's hard to see what can replace it. State of play: Decision intelligence company Morning Consult tracks five different aspects of consumer confidence. All five of them have deteriorated markedly over the course of 2022. The overall five-day average is now 15% lower than it started the year, thanks in large part to worries over COVID-19. By the numbers: In November, 70% of Chinese adults said the virus was a "major threat" to their country — up markedly from 52% in January. The big picture: It's no surprise that consumer confidence is depressed in the U.S., after having been buffeted not only by the pandemic but also now by inflation, high-interest rates, and ubiquitous talk of a possible recession. Optimism is similarly in very short supply in Europe, at least unless and until there's an end to the war in Ukraine. The bottom line: While consumer confidence in China is low, it's not a lot lower than pre-pandemic. That means there's quite a lot further it could fall, should the pandemic start spreading out of control.     A message from Walmart Walmart helps save families up to 75% on insulin     Since June 2021, families across America have saved more than $15 million on insulin. Thanks to Walmart's low-cost private brand, shoppers can save up to 75% off the cash price of branded insulin. Learn more about how Walmart helps families live better.   Was this email forwarded to you? Sign up here to get Axios Markets in your inbox. Today's newsletter was edited by Kate Marino and copy edited by Mickey Meece. Why stop here? Let's go Pro. Join the thousands of professionals using Axios Pro to keep up with the companies, deals and trends changing their industries.   Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here. 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