The Economic Week Ahead: September 11-15

This could be a big week for the stock and bond markets. There will be lots of market-moving inflation indicators: Inflation expectations (Mon), small business pricing intentions (Tue), CPI (Wed), PPI (Thu), and import & export prices (Fri). There will also be a couple of business cycle indicators that could move the markets: retail sales (Thu) and industrial production (Fri). On balance, we expect that the inflation stats will confirm that it remains on a moderating trend, while the sales and output data should suggest that the strength in the Atlanta Fed's GDPNow model (with real GDP up 5.6% during Q3) is a temporary aberration from the soft-landing scenario that has prevailed since the start of last year.

The problem is that the markets may already be priced for this happy scenario. The unhappily surprising alternative would be higher-than-expected inflation and stronger-than-expected economic activity that would send both stock and bond prices lower. This week will be an important one for which scenario the markets will discount. Now consider the following: