The consumer has never been stronger, and this could just be the beginning

The one thing we're watching over the next week is consumer strength. Our economy is driven by the consumer, and there are two big consumer-related releases over the next week – consumer sentiment and consumer confidence data.

The pattern in consumer attitudes can be a key influence on stock and bond markets. Consumer spending drives two-thirds of the economy; if the consumer is not confident, the consumer will not be willing to pull out the big bucks. Confidence impacts consumer spending, which affects economic growth. As for its stock market impact, strong economic growth translates to healthy corporate profits and higher stock prices.

So far, holiday spending has been strong, which bodes well for the strength of the consumer. In November alone, retail sales were up 5.8 percent year over year, and Mastercard SpendingPulse is projecting that we'll see the strongest holiday season sales growth since 2010, which should surpass 5 percent year-over-year growth.

The tax bill's impact

With the newly passed tax bill, we expect these consumer readings to come in strong. Here's a breakdown.

• University of Michigan consumer sentiment. Five hundred households are surveyed on their financial conditions and attitudes about the economy. The last reading was a bullish 98.5, but down from the October reading of 100.7, which is the highest since 2004. December's reading is expected to be 97.0.

• Consumer confidence. This index takes into account Americans' views of current economic conditions, and their expectations for the next six months. The most recent reading showed a 17-year high of 129.5.

Since consumer balance sheets have strengthened through deleveraging, we expect continued consumer strength, which bodes well for stock prices over the next six to 12 months.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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