The Week Ahead: Sept. 23-29, 2012

Every week, investors are deluged with a constant stream of information, media hype and data. “The Week Ahead” was designed to help differentiate between news that matters and doesn’t. Some readers may wonder why we don’t project a market outcome from these events. Single events may impact volatility in the nearer term—which is impossible to predict. But market direction over the next 12 to 24 months is rarely materially impacted by a single event or data release—particularly since data releases report the past. Our aim here is to give readers a more informed perspective on the world, with the ultimate goal of helping them become better investors—not to handicap near-term market movements from economic data or geopolitical events.

The Chicago Fed releases its National Activity Index for August.

The National Activity Index is unique in that it’s one of the few regional Fed indexes covering the entire country’s economy. However, it’s a composite of 85 other economic indicators released earlier in the month (many of which are backward looking), so it likely portends little outside of what markets already know.

Dallas Fed releases its August Manufacturing Survey.

Regional business and manufacturing surveys are often driven by short-term conditions in local industries rather than national (or global) trends. So, these are worth watching, but with a large grain of salt.

S&P releases the July Case-Shiller Home Price Index.

We quibble with many aspects of this widely watched housing index. Its calculation omits many parts of the market and its lag (the release covers data from two months before) means it has little bearing on the future.

US consumer confidence.

Confidence and sentiment indexes tell us little-to-nothing about the direction of markets or the economy. They focus on how folks felt at a single, now-past point in time. But people’s feelings change all the time. That’s why what people felt and what they do (today) are frequently very different.

Richmond Fed August Manufacturing Index.

US new home sales.

Following a strong existing home sales report last week, it’s likely new home sales likewise continue showing improvement. However, it’s important to remember the economy has come this far without a robust housing recovery. From here, even minor housing improvements would be a nice tailwind—but not absolutely necessary.

Greece’s major unions initiate a 24-hour protest of government plans to cut wages and pensions.

German and Russian inflation data released.

Mexico releases its latest trade balance report.

Census Bureau releases durable goods August orders.

Monthly fluctuations and seasonality in durable goods orders data are fairly frequent and can skew the data measurably.

Finalized Q2 US GDP released by the Bureau of Economic Analysis.

Contrary to its name, GDP figures are rarely, if ever, “final.” They’re almost always subject to revision—sometimes after years.

Weekly initial jobless claims released.

New unemployment claims data continues to show gradual improvements. While faster employment gains and a lower employment rate would certainly be preferable, history shows economic growth precedes (sometimes by years) material improvements in employment data.

Finalized Q2 corporate profits reported.

On balance, corporate America continues to be stronger than many folks realize.

Pending home sales.

September Kansas City Fed Manufacturing Index released.

Eurozone consumer confidence.

Early voting for the US presidential election begins in Wyoming and Iowa.

Spain rumored to present a new economic reform plan to leverage the ECB’s debt buying plan.

Japan releases August industrial production figures.

Expect ongoing weakness as Japan continues to recover from 2011’s deadly Great Tohoku Earthquake and tsunami. Political turnover and infighting between Japan’s leadership has also likely stymied efforts to revive its economy.

Eurozone flash inflation data released

Given accommodative policy throughout the world, continued media focus on inflation figures is likely.

August US personal income and outlays.

Chicago Manufacturing PMI

September Consumer Sentiment reported by Reuters/University of Michigan.

Recall, sentiment and confidence surveys are backward looking and have little predictive power over the future economy or market direction. Another factor worth considering? The survey data is based off of the responses of just 500 households each month.

Spain and France announce budgets for the 2013-2014 fiscal year.