Like it or not, the trading year is about to end in less than 2.5 months. So besides the US dollar’s strength, 2022 has brought only pain to US equity and bond investors.
So is there scope for financial markets to make significant moves in the months left from the trading year? Judging by the economic calendar, here are the top 7 economic events to move financial markets before Christmas:
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- November 2 – Federal Reserve interest rate decision
- November 4 – October NFP Report
- November 8 – Midterm elections
- November 10 – October CPI data
- December 2 – November NFP Report
- December 13 – November CPI Report
- December 14 – Federal Reserve interest rate decision
It is clear by now that the Fed closely watches the developments in the US job market as well as the changes in inflation. Hence, the two interest rate decisions loom large, potentially influencing financial markets towards the year-end significantly.
But the wild card here is the November 8th midterm elections. This event, while not an economic one, may change everything for the rest of the trading year because the outcome may move the US stock market.
US midterm elections
US stocks are down sharply for the year. If we are to see a recovery, it should be triggered by either of the events listed above.
However, inflation is not cooling off, as seen by last week’s report. Moreover, job data continues to come out on the strong side.
Hence, the Fed has no incentive to stop the tightening cycle.
Effectively, it means that the one event to cause a change in the stock market direction is the midterm elections. If stocks rally, the US dollar would ease, creating the premise for an end-of-the-year stock market rally.
To sum up, the Fed’s interest rate decisions are likely already priced in. What is not is the outcome of the midterm elections. As such, traders and investors alike should mark November 8 as the one event with the potential of moving financial markets.
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