As Christmas approaches and Santa Claus is loaded up and preparing for his annual visit to children around the world, it seems we may be missing another important detail within all of the holiday fun and merriment: the Fed and the bond market.
It almost goes without saying that these two entities often hold the keys to the economy. Analysts and economists often find themselves consulting with them in order to understand the handling of certain resources and the outlook of financial futures. But, what implications do they have over this upcoming holiday season?
First and foremost, the US bond market’s performance is likely to have an effect on holiday sales. Generally speaking, all else being equal, a poor bond market performance can lead to weaker consumer sentiment. This, in turn, can lead to weaker holiday sales and people cutting back their holiday shopping.
Of course, it could be said that a stronger bond market performance may lead to higher consumer confidence, and thus more holiday sales. This means that as Christmas approaches, those who specialize and work in the bond market should be watched with interest.
The second important institution to watch out is, of course, the Federal Reserve. The Federal Reserve, perhaps now more than ever, uses various tools to direct economic progress. This includes policies like increasing and decreasing the prime interest rate, lending and borrowing from commercial banks, and so much more.
All of these policies have an effect on businesses and households alike. Specifically, when interest rates are low, borrowing costs are lowered, and objectives like expanding one’s business, or making a large purchase, can become more affordable much more quickly.
These same policies could have other implications for the holiday season as well. For example, if consumer confidence were to be rapidly increased due to low interest rates, it could lead to more holiday swag, decoration, and gifts being purchased.
At the same time, you should also be sure to keep an eye on the performance of the stock market itself. While it may seem a bit removed from the holiday season, the stock market’s performance can influence overall sentiment, and, in turn, the amount of spending that will take place over the holiday season.
In conclusion, while Santa may be warming up his sleigh for his journey around the world, it’s important to take a look at how two of the market’s most important institutions are performing. The Fed and the bond market should both be watched with interest over the holiday season. Their movements and outcomes can have an immense impact on consumer sentiment and financial matters, and ultimately, the amount of holiday spending that takes place.