December always feels like the month when markets try to squeeze twelve months of drama into four short weeks. This year is no different – actually, it’s worse. We walked into the new month with Bitcoin down another six percent overnight, Nasdaq futures bleeding, and the Bank of Japan basically hinting they’re ready to hike rates the week before Christmas. Happy holidays, right?
Seriously though, the next five trading days are absurdly loaded. We’ve got everything from ISM surveys to the Fed’s favorite inflation gauge, plus enough central-bank speak to keep traders glued to their screens instead of holiday shopping. In my experience, when the calendar looks this dense heading into year-end, one or two surprises almost always show up.
A December to Remember (or Forget) for Markets
Let me set the stage. Asia kicked off the month on a sour note. The Nikkei dropped over two percent after Governor Ueda dropped some pretty clear breadcrumbs that the BoJ is leaning toward a rate hike at their December meeting – yes, the one literally days before Christmas. Market odds jumped from under 60% to more than 80% in hours. Sound familiar? It should. Remember the ghost of Christmas past in 2022 when they shocked everyone by widening the yield-curve-control band? Good times.
Meanwhile, over in the US, the Fed has gone radio silent ahead of the December 10 FOMC decision. That means the data this week is doing all the talking – and the market has already priced an 80% chance of a 25 basis-point cut. Any deviation from “Goldilocks” numbers and those odds flip fast.
Monday – ISM Manufacturing: Still in Contraction Territory?
First up today is the November ISM manufacturing index at 10:00 ET. Consensus sits around 48.5, which would still signal contraction (anything below 50). Goldman’s team actually thinks it ticks up slightly to 49.0 – small improvement, still not great.
Why care? Because manufacturing has been the soft underbelly of this whole “soft landing” story. If we suddenly print 50+ when almost nobody expects it, that’s a risk-off trigger for rate-cut bets. Conversely, anything much below 48 and the “recession trade” comes roaring back.
Manufacturing PMIs have been stuck in contraction for two years now. One decent print won’t reverse the trend, but it could definitely pause the dovish euphoria.
Wednesday – The Real Fireworks Day
If Monday is the warm-up act, Wednesday is the headliner. Three releases could legitimately move markets on their own:
- ADP private payrolls (8:15 ET) – expected +50k after last month’s weak +42k
- ISM services index (10:00 ET) – the big one, forecast around 52.0
- September industrial production and capacity utilization (also delayed data dump)
The services ISM is the heavyweight here. It represents roughly 80% of the economy and has been remarkably resilient. A drop below 51 would raise eyebrows. A surprise above 54 and suddenly the “no landing” crowd gets loud again.
ADP matters more than usual because the official jobs report got pushed all the way to December 16 – after the Fed meeting. So Wednesday’s private payroll number becomes the last real labor-market pulse policymakers will see.
Friday – Core PCE and the Inflation Reality Check
Friday brings the delayed September personal income/spending report, and buried inside it is the Fed’s preferred inflation gauge: core PCE.
Expectations are for +0.23% month-on-month, which would keep the year-on-year rate hovering just under 2.9%. That’s still a tenth or two above where the Fed thought we were when they only had CPI data. In other words, inflation is proving stickier than many hoped.
Goldman’s economists are looking for +0.22%, which would round to the same headline. Anything starting with a 3 instead of a 2 and the December cut odds drop fast. Markets are fragile when it comes to the “will they or won’t they pause in January” debate.
Core PCE is the one number that can make Powell’s beard grow faster overnight.
– Wall Street joke that’s only half a joke
Europe and Asia Aren’t Sitting Quiet Either
While the US dominates the headlines, Europe drops flash November CPI on Tuesday. Any upside surprise there and the ECB’s “we’re done cutting” narrative gets tested hard. German and French numbers today will set the tone.
China’s private services PMI on Wednesday is worth a glance too. The official numbers were mixed, and if Caixin prints weak again, the “China stimulus trade” that lifted everything in September could fade fast.
Geopolitical Wildcards Still in Play
Oh, and peace talks on Ukraine keep bubbling. US negotiators met Ukrainian counterparts in Florida yesterday – no headlines yet – and the main envoy heads to Moscow today. One surprise announcement and risk assets could gap 2-3% in either direction. Classic December stuff.
What I’m Watching Personally
I’ve been doing this long enough to know that December data dumps have a nasty habit of defying consensus when positioning is lopsided. Right now, almost everyone is leaning toward “one more cut in December, then pause.” That makes me nervous.
My base case: we muddle through with slightly better-than-feared numbers, the Fed cuts 25 bps on December 10, and markets grind higher into year-end on thin volume. But the risk is heavily skewed toward an upside surprise on growth/inflation that forces the Fed to sound more hawkish than anyone wants to hear right now.
Either way, strap in. This week is going to give us the clearest picture yet of whether 2025 starts with a dovish party or a hawkish hangover.
Stay nimble out there.
