Forecast for the week of 3/24/2008

Forecast for the Week


So after all that...what lies in wait as the markets reopen following the holiday weekend? Yet another action packed economic calendar. We'll get a look at the housing market via the latest numbers on both New and Existing Homes Sales, but the report voted most likely to influence the markets will be Friday's Personal Income and Spending report with its imbedded data on Core Personal Consumption Expenditures (PCE)...which just happens to be the Federal Reserve's favorite measure of consumer inflation. Please do not hesitate to go to my website for more information at www.tombrewerjr.com.

Particularly on the heels of the most recent rate cut, this report will take special significance. The Fed would like to see a core inflation rate below 2.0%, but with Bernanke and crew preferring to fight a looming recession with their continuing series of rate cuts, rather than targeting inflation with rate hikes, this will be a tough target to reach for the foreseeable future.

Since inflation is the enemy of fixed return investments like Bonds, a jump higher in the Core PCE on Friday could cause Bond prices to worsen quickly, and home loan rates pop higher.