The Week Ahead (1st November 2021)

OK... deep breath Luke... it's a massive week ahead. 

This week we're going to have the RBA (sorry no preview), Fed (preview Tuesday), BOE (preview Wednesday), Payrolls (Preview Thursday), Norges Bank (maybe a preview if I'm feeling generous) and a raft of economic data. Yes... it's going to be a messy week ahead. 

All eyes on the Fed this week 

For markets though, expect the first couple of days to be fairly sleepy in the run up to the Fed. I would be very surprised to see major market moves on the back of any data etc given the importance of the Fed decision. The question is going to be... is the Fed announcing a taper, and if so, what is the likely timeline? 

The first part of the question, to me at least, should be a definitive yes. Sure, there is some hesitation given the miss on payrolls in the October report, but Powell himself said at the last minute that he didn't need to see a blowout jobs report in order to mark the start of the taper. The second part of the question is less clear. I would anticipate a tapering of 10bn to ABS and 5bn to MBS per month for the next 8 months. This way both parts of the program will wind down simultaneously. 

However, it is of course possible the Fed looks at the mortgage market, is comfortable with current rates, and decides to end that part of the purchase program more quickly. 

Lots of attention will also be paid to dissenters and those who think a faster pace of tightening is deserved. Money markets are currently pointing toward a tapering by mid 2022 and then hikes starting almost immediately after the taper. 2 full hikes are basically priced in now for 2022. I would not be surprised at all to see a big Powell pushback on this given their current guidance on AIT over the medium-term. 

But anyway, that's enough on the Fed for now... I will post a full primer on Tuesday evening / Wednesday morning ready for the decision on WEDNESDAY AT 6PM. Note the time change due to the UK clock shift. 

Earnings I'll be watching: 

In the week ahead the earnings season really continues for those names which are not financials or tech. Semiconductor manufacturer NXP reports Monday, along with Ryanair. 

Tuesday: We see a range of stocks reporting from Ralph Lauren to Caesars Entertainment and BP to Pfizer. 

Wednesday: Qualcomm, CVS and Hyatt. 

Thursday: Moderna, Toyata, Credit Suisse, Barrick Gold

Friday: Goodyear tires, Embraer. 

SATURDAY: Berkshire Hathaway

Payrolls Friday: 

Obviously this will be watched closely, and could be a queue for the Fed to adjust the pace of the taper at the next meeting. It's a bit early for a consensus number worth anything for the report... but I expect to see around 450k - this would be commensurate with additional Christmas hiring. 

Other stuff:

COP26 is going to be a focus no doubt for the ESG watchers... BoJo warning today that the whole thing is close to failure with lack of agreement everywhere. 

I'll be closely monitoring Treasury yields this week. Expect interesting action as the Fed draws and passes, I wouldn't be surprised to see a bit of steepening in the curve as Powell pushes back against money market action while inflation expectations continue to build. 

Non-Sequitur: 

I watched the Wizards v the Celtics over the weekend and the game went to double overtime as neither NBA side could pull out a lead at the end of normal play / the first overtime. 

This made me wonder... what's the longest an NBA game has ever gone on for? 

The longest NBA game occurred in 1951, between the Olympians and the Royals. Indianapolis beat Rocherster 75-73 after 6 overtimes!!

Geoff Burke for USA Today Sports