October 29, Korean time, is the day three numbers that read the US economy all land together. The Fed's rate decision comes at 3 a.m. Then at 9:30 p.m., US Q3 GDP and the September PCE inflation data come out.
Three numbers that can shake the stock market, spread over about 18.5 hours.
The Schedule, in Korean Time and US Time
✦ Four Releases in Two Days
Times shown in US Eastern and Korean time
First Number: The 3.75-4.00% Fed Rate. The Market Is Eyeing December
On September 16, the Fed raised its policy rate by 0.25 percentage points, to 3.75-4.00%. The statement said economic activity was expanding at a solid pace, but inflation was still elevated.
This time, a hold is the market's base case. What matters is how strongly the statement and the press conference leave the door open to another hike in December. Most analysts say that's the key.
✦ What the Market Has Priced In
Odds from the rate-futures snapshot, early Oct 23 ET
In the rate-futures snapshot from early on October 23, US Eastern time, the odds of a hold in October were about 92%. The odds of a 0.25-point hike were about 8%.
For December, the market priced in about a 72.3% chance that the target range rises to 4.00-4.25%.
So the market sees an October hike as unlikely, but a year-end hike as fairly likely.
Those odds are the 'bets of investors' baked into futures prices. Say the Fed holds this time. If the press conference stresses rising prices and keeps a December hike open, the market can read it as a hawkish hold, a hold that still leans toward hiking.
On the other hand, if the Fed puts more weight on prices cooling, expectations for year-end rates could come down.
Second Number: GDP Growth Near 3%. How Strong Is the US Economy?
US Q3 real GDP growth matters a lot too. The market expects about 3% on an annualized basis. The consensus is 3.0%, Trading Economics' own forecast is 3.1%, and Continuum Economics' is 2.8%. A little different each time.
✦ Q3 GDP Growth Forecasts
Annualized; the sources differ a little
Still, all three forecasts show growth speeding up from the 2.2% actual in Q2.
That annualized 3% is the Q3 pace converted as if it lasted a full year. As a quarterly rate, it works out to about 0.74%. A 3% figure looks strong on its own. But we should also look at what drove the growth.
Continuum Economics expects consumer spending to grow 3.4% annualized. It expects domestic final demand, which leaves out inventories and net exports, to grow 3.8%. Its forecast for business investment, which includes AI spending, is 9.6% annualized growth.
So AI data center and equipment spending are pushing business investment up, and consumers are holding up quite well.
But GDP also counts inventories and trade. If products that haven't sold pile up as inventory, the goods that were produced get counted as inventory investment, and that can lift the growth rate.
So a high GDP number and an economy that's really running well are a little different things. (Keep producing and nothing sells? It still shows up in GDP.)
Even so, this number shapes US economic policy, and that affects the whole world. So it's a seriously important number.
Third Number: Monthly PCE of 0.5%. Will Prices Heat Up Again?
PCE is one of the price indexes the Fed watches most closely when it judges inflation.
The September figure isn't out yet. The market expects headline PCE, which is the price change across all consumer spending including food and energy, to rise 0.5% from the prior month and 3.6% from a year earlier.
Core PCE, which leaves out food and energy, is forecast to rise 0.3% on the month and 3.1% year over year.
✦ PCE Inflation: August vs. September Forecast
Monthly and year-over-year changes
For comparison, the August actuals for headline PCE were 0.3% monthly and 3.4% year over year. Core PCE was 0.2% and 3.0%. If the forecast holds, prices rose faster in September than in August. So why is the Fed so sensitive to this number?
The Fed's long-run inflation target is 2% on PCE. If PCE runs too far above that target, the Fed has no choice but to consider a rate hike.
Energy prices are a variable too. On October 23, Brent crude climbed to $116.27 a barrel, its highest level in more than five months.
A Houthi attack in Saudi Arabia and an oil spill reported in the United Arab Emirates (UAE) raised fears of supply disruption in the Middle East. When oil rises, it hits prices directly, right? Of course, October's oil jump isn't in the September PCE.
But the Fed sets rates by looking at the price trend ahead, too. So this oil rise will inevitably weigh on the Fed's judgment.
The Three Numbers Don't Move Alone
We can split the GDP and PCE results into four combinations.
✦ Reading the Market From GDP and PCE
Growth direction and price direction, four combinations
Growth stocks are especially sensitive to releases like these. When you value profits that arrive several years from now in today's terms, higher rates cut that value down harder.
So even when the economy is growing and the earnings outlook looks good, a rate rise can shake share prices.
On the flip side, if a slowdown really sets in, companies' sales outlooks weaken, and that hurts share prices in the same way. That's why GDP and PCE have to be read as a set. The best flow is probably GDP growing while PCE stays stable.
The Market Is Already Shaky Before the Releases
The S&P 500 is down about 2.12%, from 7,818.93 at the October 6 close to 7,652.96 at the October 23 close.
✦ S&P 500 Closing Prices
Oct 1-23, US Eastern regular-session closes
On October 22, the S&P 500 fell 1.21% and the Nasdaq Composite fell 2.6%. The semiconductor index had its biggest one-day drop since June. Meta's earnings poked again at the worry over whether AI investment will turn into real profit.
The next day, the Nasdaq bounced 0.2%, but the S&P 500 slipped another 0.14% or so.
Also, next week Alphabet and Microsoft report earnings on October 28, and Amazon on the 29th. How much more they spend on AI data centers, and whether the money already spent is coming back as revenue and cash flow, could set the mood for tech stocks.
When release week arrives, the first thing to look at isn't the 3% GDP headline itself. Whether that growth came from consumption and investment, or mostly from inventories and trade, matters too.
Then check whether core PCE stays around 0.3%, and whether headline inflation is rising. And the Fed's statement and press conference will show the future rate path most clearly.
This isn't investment advice. You know that, right? Let's each protect our own hard-earned money.
That's all for this post. See you next time.
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🌐 Korean version: 10월 28일, 29일... 미국 GDP·물가·연준 회의가 한 주에 몰렸다! 증시를 흔들 세 가지 숫자
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