Nvidia, Warner Bros Discovery and CVS Health rise premarket; Toll Brothers falls
This week will be all about the Federal Open Market Committee (FOMC) statement on Wednesday. It is anticipated that the Fed will not be telegraphing further key interest rate cuts in the FOMC statement, no matter what their dot plot signals, since the Fed remains very uncomfortable with the delay in economic data from the federal government shutdown.
The bottom line is there is no reason for the Fed to remain restrictive when the U.S. economy is not creating many jobs, so in my opinion, the Fed has to cut key interest rates two more times after the December 10th cut and move to a “neutral” rate. Furthermore, the inflation risk has fizzled, and due to falling home prices, excess rental properties, and falling crude oil prices, so if anything, there is a potential deflation risk that the Fed must consider.
Interestingly, China’s worldwide trade surplus for the first 11 months this year rose to a record $1.076 trillion. This record surplus has occurred despite a 29% drop in exports to the U.S. A weak Chinese yuan is fueling this export surge, so if China devalues its currency, its exports are anticipated to continue to rise.
The Wall Street Journal featured an article entitled “China’s Growth Is Coming at the Rest of the World’s Expense.” The U.S. is still dominating worldwide GDP growth, but China’s soaring exports are curtailing GDP growth with almost all of its trading partners. Specifically, the WSJ said, “China is swallowing up a growing share of the world’s market for manufactured goods. This reveals an uncomfortable truth: Beijing is pursuing a ‘beggar thy neighbor’ growth model at everyone else’s expense.”