“America First”: What Traders Will Be Watching Next Week

“America First”: What Traders Will Be Watching Next Week

Ok, so it turns out that even if Congress is willing to suffer Donald Trump for a week, the American public isn’t.

Or at least not as long as he’s signing Muslim bans.

Next week was supposed to be all about the NFP print and parsing the Fed statement, but noooo. No, it will be all about Trump, one way or a-f*cking-nother. Even if he has to block an entire religion from entering the country to keep the spotlight on himself.

Now I don’t know whether impeachment would mean Dow 30,000 or Dow 10,000, but as I mentioned earlier this morning, I think investors had better start thinking about it.

For anyone still interested in the FOMC or the jobs number, here’s a preview from Bloomberg.

Via Bloomberg

America first. Markets will again zero in on the U.S. this week, and not just because of Donald Trump. The Federal Reserve meeting and nonfarm payrolls may set a clear direction for dollar and yields for the next few months.

  • U.S. GDP data on Friday showed the largest negative contribution from net exports since 2010. This will give the president ammunition for his Twitter feed because it confirms his view on the evils of globalization. So prepare.
  • Beyond Trump’s rhetoric, it’s going to be a big week for orthodox economic developments in the United States.
  • No one expects a policy shift at the Fed meeting Wednesday. The FOMC has remained silent on whether they are considering hiking rates in March; the market prices around a one-third chance. This low probability reflects last year’s experience of perpetual rate hike delays.
  • But if the Fed hints that a rate hike is a serious possibility for March, pricing should rise to between 50% and 75%. The dollar would obviously benefit. On the other hand, silence would likely lead yields and the dollar to fall.
  • The dot plot in December showed a median expectation of three rate hikes this year. Nothing has happened since then to suggest this is too optimistic. Therefore, it seems likely the FOMC will acknowledge a March hike is a possibility…so there is also an upside risk for the dollar and yields.
  • However, watch out for Friday’s payroll data as a possible sting in the tail. The Fed won’t have access to the data when they announce policy, and it wouldn’t be the first time the data threw a spanner into the Fed’s intentions.

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