No shortage of economic news despite a light trading week
Summary
Markets had quite a bit of data to digest last week. Starting with the announcement on Friday, November 22, President-elect Donald Trump nominated Scott Bessent to lead the Treasury. With further tariff threats, the declared ceasefire between Israel and Hezbollah, and numerous economic data releases during the first half of the week, investors had plenty to ponder.
Key nominations
President-elect Trump continued his trend of quickly announcing nominations for key Cabinet positions, with last week’s highlight being the selection of Scott Bessent as Treasury Secretary. While there were several candidates floated in the press, the markets reacted positively to Bessent’s appointment. The 10-year Treasury yield dropped nearly 15 bps on Monday, and at the time of this writing, yields were at their one-month lows with the 10-year at 4.20%.
The markets welcomed the nomination as Bessent has been clear on his “3-3-3” approach: reducing deficit spending to 3% of GDP, boosting GDP growth to 3% through deregulation and pro-business policies, and producing an additional 3 million barrels of oil per day. This strategy offered reassurance as many investors were concerned about deficit spending in the U.S. Additionally, Trump selected Kevin Hassett to lead the National Economic Council, which was highly anticipated after Hassett’s key role in President Trump’s first administration.
Geopolitics and tariffs
A notable development regarding geopolitics also came early in the week — the announcement of a ceasefire between Israel and Hezbollah. While instability remains in the region, the markets welcomed the initial step of de-escalation. Regarding tariffs, President-elect Trump stated that he intends to implement a 25% tariff on all goods coming in from Mexico and Canada. News of the potential tariffs sent their currencies lower against the dollar.
Key economic releases
Last week, there were several regional PMIs released, all showing continued headwinds for U.S. manufacturing. New home sales again missed expectations, which was somewhat anticipated given the sharp rise in mortgage rates over the past month. Federal Open Market Committee (FOMC) minutes showed all members voted for the latest rate cut and most see risks as balanced. However, they indicated that further rate cuts may come more gradually if inflation remains above their target. The second estimate of GDP showed revisions were mostly as expected, with GDP still at an above average of 2.8%.
Arguably, the most notable economic release for the week was the Fed’s preferred inflation gauge, which showed headline PCE at 2.3% and core PCE at 2.8%, in line with expectations. While progress has slowed on the inflation front, the market is still pricing in a 66% chance of a rate cut in December. However, the path of future rate cuts is more uncertain. Investors seemed to view most of the news positively, on balance, as U.S. equity markets were up 1.08% on the week, while the 10-year Treasury declined ~23 bps.
Source: CME Fedwatch
The week ahead
Next week, there will be several economic releases, but investors will keenly focus on the U.S. employment report due on Friday.
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