salvation army bell ringerREUTERS/Brendan McDermidSalvation Army Bell Ringer Nate Hinzman dances for Black Friday shoppers outside Bloomingdales department in the Manhattan borough of New York, November 27, 2015.
It's the first week of the last month of 2015, and that means there's a lot of economic data on deck.
First, we'll get finalized numbers on Thanksgiving weekend and Black Friday sales. Preliminary estimates from RetailNext and ShopperTrak show sales were down in the low single-digits.
Keep in mind, historically these early holiday sales stats have hadalmost no correlation to the final holiday season sales stats. At most, they just tell you a little bit about consumer behavior but nothing about the economy.
Importantly, Friday comes with the November US payrolls report.
The folks at the Federal Reserve will be watching the data carefully as they count down the days to their December 15-16 Federal Open Market Committee meeting, which could be the day they lift interest rates for the first time since June 2006. During the darkest hours of the financial crisis, the Fed pulled their benchmark rate down to a range of 0.00% to 0.25% in December 2008 in an effort to stimulate the economy.
Here's your Monday Scouting Report:
Top Stories
  • Will geopolitics trump economics in 2016?. Geopolitical tensions are running high. Most recently, Russian President Vladimir Putin signed into law economic sanctions against Turkey in retaliation for shooting down a Russian warplane near the Syrian border. Meanwhile, Europe's refugee crisis remains a mess, especially after the horrific terrorist attacks in Paris earlier this month.

    “2016 may prove to be a year in which politics rather than economics comes to the fore as a driver of risk in financial markets," write Citi’s Mark Schofield and Tina Fordham. "Over the past few months, markets have become transfixed by two economic drivers; Fed policy and China's economic outlook, but an increasingly volatile and interconnected geo-political landscape could threaten the relative stability we have seen during the past two years. Politically driven events are unfolding right across the globe, but Europe looks particularly vulnerable to market moving political risks with Germany's de-facto leadership of the EU and Britain's membership of it increasingly under scrutiny.”

    The analysts note that the "most obvious" ways the consequences manifest in the economy are through higher commodity prices as a result of sanctions, military conflicts, and terrorist activity. And while there are surely some who will come out winners, the aggregate effect will be negative. From Schofield and Fordham: "Sanctions will normally have an impact on the economic prospects of an affected country but there is often an offset to this; when exports from a sanctioned country fall, there is likely to be a substitution effect in another producing economy. A combination of more sanctions and increased protectionism is, however, likely to result in lower levels of trade and this, with reduced comparative advantages in production, is likely to weigh on global growth."
Federal Reserve speakers 
  • Here's Wells Fargo's Sam Bullard with this week's Fedspeak: "On Tuesday, Chicago Fed President Evans (voter, dove) speaks in Michigan on the economic outlook and monetary policy. Later that day, Fed Governor Brainard (voter, dove) speaks in Stanford on the “Lower Neutral Rate and its Implications for Monetary Policy.” On Wednesday three officials speak–Atlanta Fed President Lockhart (voter, moderate) speaks in Florida on the U.S. economy; Fed Chair Yellen (voter, dove) speaks to the Economics Club of Washington; and San Francisco Fed President Williams (voter, dove) speaks in Portland on the U.S. economic outlook. Thursday could be the big day of the week as Fed Chair Yellen testifies before the Joint Economic Committee of Congress which will likely give the final signal to the financial markets over the Fed’s rate hike intentions at the December 15-16 FOMC meeting. Also on Thursday, Cleveland Fed President Mester (voter, hawk) and Fed Vice Chairman Fischer (voter, moderate) speak at a financial stability conference in Washington hosted by the Cleveland Fed and the U.S Treasury. On Friday and importantly after the November payroll report release, St. Louis Fed President Bullard (2016 voter, hawk) speaks in Philadelphia on “Neo-Fischerianism” at the Philadelphia Fed Policy Forum: The New Normal for the U.S. Economy. At the same conference, retiring Minneapolis Fed President Kocherlakota (non-voter, dove) speaks on monetary policy renormalization. On a related monetary policy note, ECB President Draghi speaks Friday in New York at a meeting of the Economics Club of Washington, a day after the ECB is expected to expand its monetary policy accommodation."
Syrian Migrants Refugees GreeceGetty ImagesMigrants wait in line for food deliverd by humanitarian organisation as they waits to be allowed to pass the Greek-Macedonian border on November 26, 2015 near Idomeni, Greece.
Economic Calendar
  • Chicago Purchasing Manager Index (Mon): Economists estimate this regional activity index slipped to 54.0 in November from 56.2 in October. From Barclays: “This indicator of Chicago-area manufacturing activity surged higher last month as new orders, production and inventories boosted the headline index. Sharp moves, such as the one last month, are typically followed by a bit of payback. As such, we look for a modest decline in the headline index this month.”
  • Pending Home Sales (Mon): Economists estimate the pace of sales climbed 1.0% in October. Here’s Bank of America Merrill Lynch: “We look for pending home sales to increase 1.5% after the past few months of weak readings. We believe demand for home sales remains robust, which should show through in the pending home sales figures.”
  • Dallas Manufacturing Activity (Mon): Economists estimate this regional manufacturing index improved to -11.0 in November from -12.7 in October.
  • Auto Sales (Tues): Analysts estimate the pace of auto sales slipped to an annualized rate of 18.0 million units. "In recent years, we have seen automakers make greater use of Black Friday temporary deals to drive auto sales and we expect this trend to continue this year," RBC Capital's Joseph Spak said. "The focus will be on VW sales following the "dieselgate" crisis, which we expect will be pressured."
  • Markit US Manufacturing PMI (Tues): Economists estimate this manufacturing index fell to 52.6 from 54.1 in October. "Domestic demand appears to be holding up well, but the sluggish global economy and strong dollar continue to act as dampeners on firms’ order book growth," Markit's Chris Williamson said.
  • ISM Manufacturing (Tues): Economists estimate this manufacturing index climbed to 50.5 in November from 50.1 in October. Here’s Credit Suisse: “Regional manufacturing surveys in hand point to a modest increase in the headline manufacturing index to 50.6 in November (up from 50.1 in October). We find that of the regional manufacturing surveys, ISM forecasts based on the Richmond Fed and Philly Fed surveys had the highest directional hit rates in forecasting whether the ISM will be up or down in any given month. Over the past six months, the Richmond and Philly Fed surveys’ directional hit rates have been 83% and 67%, respectively, and over the past 12 months, 83% and 75% — odds that are far better than the toss of a coin.”
  • Construction Spending (Tues): Economists estimate spending increased by 0.6%. Here’s Morgan Stanley’s Ted Wieseman: “Homes still under construction from prior gains in housing starts should support a solid gain in homebuilding activity, but the pullback in October starts points to a slower rise than the 2% gains in September and August. Along with a flat expected reading for private nonresidential spending and modest anticipated gain in state and local government, we expect the smallest gain in overall construction spending in nine months.”
  • ADP Employment Change (Wed): Economists estimate US companies added 190,000 private payrolls in November. Here’s Bank of America Merrill Lynch: “We look for ADP private payroll growth of 175,000 in November, down modestly from 182,000 in October. This would be a touch below the recent 3-month trend of 184,000, but reflect continued healthy improvement in the jobs market. Initial jobless claims provide an early signal and have remained low during the month, supporting broad hiring. Manufacturing and mining likely remained weak, however.”
  • Beige Book (Wed): At 2:00 p.m. ET, the Federal Reserve will publish its collection of economic anecdotes. Here’s Credit Suisse: “With the first Fed rate hike since mid-2006 on the horizon, next week's Beige Book may attract some attention. We will focus on anecdotes regarding wages and sales activity. It wouldn't surprise us if there were more frequent comments on building wage pressures. But businesses may sound conservative in their expectations for holiday sales. The previous Beige Book, released October 14, suggested a moderation in growth in most districts since the September 2 report. "A number of Districts cite[d] the strong dollar as restraining manufacturing activity as well as tourism spending." However, the Beige Book's labor market anecdotes seemed more upbeat than one might have guessed from the weak September employment report and were more consistent with the stronger October jobs data.”
  • Initial Jobless Claims (Thurs): Economists estimate initial claims climbed to 269,000 up from 260,000 a week ago.
  • Markit US Services PMI (Thurs): Economists estimate this index of services climbed to 56.7 in November from 54.8 in October. "The US economy is showing further robust economic growth in the fourth quarter, with the pace of expansion picking up in November," Markit's Chris Williamson said.
  • Factory Orders (Thurs): Economists estimate orders increased by 1.2% in October. Here’s Barclays: “ Durable goods orders rose 3.0% on the month, driven by an outsize gain in nondefense aircraft orders and unexpected strength in core capital goods. Coupled with a small expected decline in orders for nondurable goods, we look for a 1.4% gain in total factory orders to follow two consecutive monthly declines for the series.”
  • ISM Non-Manufacturing (Thurs): Economists estimate this services index slipped to 58.0 in November from 59.1 in October. Here’s BNP Paribas: “After an impressive surge in October, we expect the non- manufacturing ISM to have retraced somewhat in November. We expect optimism in the services sector to have slowed a bit, in line with the recent slowing in consumer confidence. There is some upside risk to our forecast, as employment gains have shown resilience.”
  • The Jobs Report (Fri): Economists estimate US companies added 200,000 nonfarm payrolls in November, driven by a 190,000 gain in private payrolls. The unemployment rate is expected to be unchanged at 5.0%. Average hourly earnings are expected to have increased by 0.2% month-over-month or 2.3% year-over-year.
new york stock exchange trader kid girlREUTERS/Brendan McDermidVictoria Parrinello sits inside her father Joe Parrinello's (R) booth on the floor of the New York Stock Exchange, November 27, 2015.
Market Commentary
As 2015 continues to wind down, more and more of the pros on Wall Street are looking ahead to 2016. 
Goldman Sachs' David Kostin doesn't expect much out of the market. 
"We forecast the S&P 500 index will tread water for a second consecutive year in 2016," Goldman Sachs' David Kostin said. "Our year-end 2016 target of 2100 represents a 1% price gain from the current index level (2089), which itself is just 1% above the year-end 2014 level of 2059. Including dividends, we expect the total return in 2016 will equal 3%."
Kostin notes unfavorable conditions include tighter monetary policy, contracting P/E multiples, and plateauing profit margins.
Bank of America Merrill Lynch Savita Subramanian is a hair more bullish, calling for the S&P 500 to hit 2,200 by the end of 2016.
But Subramanian also thinks the S&P hits 3,500 by 2025.
"Based on current valuations, a regression analysis suggests compounded annual returns of 8% over the next 10 years with a 90% confidence interval of 4-12%," she said. "While this is below the average returns of 10% over the last 50 years, asset allocation is a zero-sum game. Against a backdrop of slow growth and shrinking liquidity, 8% is compelling in our view. With a 2% dividend yield, we think the S&P 500 will reach 3500 over the next 10 years, implying annual price returns of 6% per year."

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