2023's reputation to be set in the next 15 weeks

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the next 15 weeks will set the tone for 2023. So far in 2023 the benchmark equity market is up +15% (S&P500), benchmark bond yields are up +70 bps (UST10yr +20%), and the USD is unchanged.First we are now in the last week before the America's Labor Day holiday, signaling the end of the "sell in May (Memorial Day) and stay away (until Labor Day)" hiatus. Financial markets will then come back to full capacity. If investors did sell in May, they have missed a +5% stock market rally. The benchmark UST 10yr rate rose +50 bps hurting bond prices. And US CPI inflation fell -1% over that time. But what awaits them? How they react will lock in 2023's reputation.This upcoming week will be a busy one for big data releases. It will be a very busy week in the United States with investors closely following their labour market report (the non-farm payrolls report) which for August drops on Saturday, September 2 (NZT). Markets currently expect only a gain of +170,000 this time. Before then we will get the US PCE price index, personal income and spending data, JOLTS job openings, ISM Manufacturing PMI, and the second estimate of American Q2 GDP growth.Elsewhere, the focus will be on inflation rate figures for the EU, Germany, France, Italy, Spain, and Switzerland. Additionally, flash manufacturing PMI readings will be released for China, South Korea, India, Russia, Spain, Italy, and Canada. Finally, Turkey, India, Brazil, and Canada are set to report their Q2 GDP growth figures.The last big northern 'holiday season' event is the central banker conference at Jackson Hole.With his eyes firmly on expected American inflation pressures, Federal Reserve Chair Jerome Powell, speaking at the symposium, emphasised the potential necessity for additional interest rate hikes in order to effectively manage the pressures they still see ahead. Despite currently waning inflation, they still have "robust" consumer spending, and an expanding economy he said, and a healthy labour market. However, he did suggest they could hold rates steady at its next meeting in September.Market reactions to this closely-watched speech have been modest, although Wall Street equities rose and they have ended with a winning week. And the USD rose modestly.At the same conference a respected Stanford professor warned that liquidity risks in the gigantic US Treasury bond market may get worse if another crisis like the March 2020 pandemic shock occurs again. (Also, see this.) And that is because dealer balance sheets are growing much more slowly than the holdings of US Treasuries (because so much more is being issued). Attempts to sell those down in a financial crisis will get stymied by what dealers can handle without themselves coming under stress. And that could cause a meltdown. He did have some suggestions for policymakers.Meanwhile the one piece of American data that was released over the weekend, the University of Michigan consumer sentiment survey, didn't have much market impact. After rising sharply for the past several months, this consumer sentiment indicator moved sideways in August. Still, it was at its second highest reading in 21 months and is now about 39% above the all-time historic low reached in June of 2022.In China, the