It's a week everyone is waiting for. With the recent gradual analysis of the economic situation, the forecast for future economic changes has become clearer.

Inflation reports have sent stock market shocks throughout the year, allowing markets to gauge the likely policy path of the central bank amid a relentless spike in inflation. This week's consum er price index reading is crucial as signs of falling inflation could allow the Fed to further slow the pace of interest rate hikes, which would boost stocks.

The market expects that the FOMC may raise the terminal interest rate above 5.00% at the December meeting. The September dot plot shows that interest rates rose to 4.40% at the end of this year→ peak interest rates were reached in 2023 (market expectations in March) at 4.60% → rates fell to 3.90% in 2024 → 2.90% in 2025 → while the long-term neutral rate remained at 2.50% _By Bloomberg

According to data compiled by Bloomberg, over the past 6 months, the average gain or fall of the S&P 500 on the day of the CPI release was about 3%. It was the most unusual press conference since 2009. Investors from all walks of life are trying to predict the future economic trend through the spokesperson's words, predict the next direction of the country, so as to make better money.The Fed's forecasts for the U.S. economy, as well as the central bank's forecasts for interest rates, will also be in focus.

Global fund managers expect 2022 to end with a rally, with the S&P 500 rising for two consecutive months in October and November. However, for the coming months, discussants expect uncertainty or a downside.

Eric, chief investment strategist at Russell Investments, said: "It's very difficult for investors to get the right position right now. The Fed's policies are indeed curbing the stock market binge until Wall Street believes the central bank is about to finish raising interest rates. ”

The lack of investor confidence in entering this critical week is evident in the options market. Over the past 10 weeks, the CBOE Volatility Index (VIX) has fallen on 80% of trading days. The volume of a single stock put surged sharply relative to the call option _By Bloomberg

Meanwhile, the need to hedge against individual stock losses pushed the CBOE stock put call ratio to 1.5 last week — the biggest level since 2002 and more than double that the year's average.

Futures market pricing shows that the Fed's policy rate peaked at around 4.90% in the first half of 2023. This means that the Fed still has room to raise interest rates. According to Carson Investment Research, over the past 8 rate hike cycles, the Fed has eventually raised rates above CPI.

A 50 basis point rate hike on December 14 would keep the federal funds rate in the range of 4.25% to 4.50%. Today, Tuesday's economic index has changed dramatically, and unlike in the past, this irregular change is an important reason why investors cannot grasp the next time, so the next days will be extremely difficult for investors.We recommend taking a defensive stance, focusing on consumer necessities and healthcare companies. If the Fed has a history of overshooting, that would make us cautious about the stock market. ”

（Writer：Juliy）