Top 5 Market Highlights to Watch for Next Week

Investing.com — Investors will be closely monitoring a key inflation indicator and comments from several Federal Reserve officials following last week’s significant interest rate cut. The upcoming PMI data is expected to provide new insights into the strength of the global economy, while gold prices are anticipated to continue their record rally. Here’s a look at the market developments expected in the week ahead.

1. Inflation Reading
   The Fed’s preferred inflation gauge, slated for release on Friday, will reveal whether price pressures have continued to ease as the central bank begins to move away from its restrictive monetary policy aimed at cooling the economy. Economists forecast that the personal consumption expenditures (PCE) price index for August will have increased by 2.5% year-over-year. Recent economic projections from the Fed estimate the annual rate of the index to drop to 2.3% by year-end and 2.1% by the end of 2025. This week’s economic calendar also includes a final reading on second-quarter GDP, as well as reports on consumer confidence, durable goods orders, new and pending home sales, and weekly data on initial jobless claims.

2. Fedspeak
   Comments from Fed officials in the coming days are expected to provide insights into last week’s significant rate cut, making them a focal point for investors. Atlanta Fed President Raphael Bostic will speak first on Monday, followed by Chicago Fed President Austan Goolsbee. Fed Governor Michelle Bowman will address the public on Tuesday and Thursday. Recently dissenting from a Fed decision for the first time since 2005, her remarks will likely clarify her rationale behind cautioning against rapid rate cuts. Fed Chair Jerome Powell will deliver remarks on Thursday at the annual U.S. Treasury Market Conference, where New York Fed President John Williams and Vice Chair of Supervision Michael Barr will also speak. Investors are keen to gauge any signals regarding the Fed’s stance on balance sheet reduction.

3. Market Volatility
   The S&P 500 index achieved its first closing all-time high in two months last week following the Fed’s 50-basis-point rate cut, marking the beginning of the first monetary easing cycle since 2020. The index has risen 0.8% so far in September, typically considered a weak month for stocks, and has gained 19% year-to-date. However, market momentum could face challenges if upcoming economic data does not support the optimistic outlook of a "soft landing"—a scenario where inflation declines without hindering growth. Stocks tend to perform better when rate cuts coincide with economic stability rather than recessions. Additionally, the upcoming election between Republican Donald Trump and Democrat Kamala Harris may heighten market sensitivities, as recent polls indicate a very tight race. According to UBS equity derivatives strategists, unless significant deterioration in data occurs, U.S. elections are likely to become a more prominent focus.

4. PMI Data
   Flash PMI data starting Monday will offer the latest insights into the global economy’s condition. Notably, the euro area composite PMI has remained in expansion territory for six months, while the UK’s PMI has done so for ten months, supporting a resilient sterling. Currently, markets are optimistic that the Fed’s half-point rate cut will help avert a potential U.S. recession and, consequently, a global downturn. However, concerns linger, particularly in Germany, where business activity moved deeper into contraction in August, and sentiment remains subdued. Meanwhile, China’s economy is still facing challenges, raising the risk of missing its annual growth target of approximately 5%.

5. Gold Records
   Bullish sentiment in the gold market is driving prices to new heights, with the $3,000 per ounce milestone in sight, supported by monetary easing from major central banks and a closely contested U.S. presidential race. Spot gold reached a historic high of $2,572.81 an ounce last week and is on track for its strongest annual performance since 2020, reflecting a rise of over 24%. This surge is attributed to safe-haven demand amid geopolitical and economic uncertainties, along with strong central bank purchasing. Low interest rates tend to favor gold, which does not yield interest. Analysts from Citi recently estimated that gold prices could reach $3,000 per ounce by mid-2025 and $2,600 by the end of 2024, driven by U.S. interest rate cuts and strong demand from exchange-traded funds and physical markets.