Who will Trump give the rose (ahem) Chair Position to, and who will he say “Your Fired” to?
Investors have a busy week ahead as Trump is supposed to announce his pick for the next Fed chair, the latest Fed statement, and another busy earnings week. On the economic front, we have Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.
Head of the Fed: And the rose goes to… President Trump is likely to announce the new Federal Reserve chair before he leaves for China later this week. Sources are saying that the 2 finalists for the most powerful person on Earth are Fed Governor Jerome Powell and Stanford University Economist John Taylor, meaning Fed Chair Janet Yellen and the rest of the candidates are out of the running. PredictIt.com continues to have Jerome Powell as the odds on favorite. We will continue to see movements in the markets along with the US Dollar as the Fed Chair decision comes nearer. However, anything can happen.
Federal Reserve: So in the same week of a potential new Fed chair, we have the Fed scheduled to release a statement on Wednesday (11/1). This is one of the smaller meetings with no updated projections and no press conference after. The markets are factoring this meeting as being a nothing burger for rates. However, we may get a clue as to if the Fed started to unwind their balance sheet. If the unwinding started and is larger than anticipated, we may see the US Dollar shoot up, along with oil and Treasury Yields. Bank stocks will also be happy as banks continue to pocket the extra interest rate instead of paying depositors so you will continue to get .00001% on your savings.
Earnings: Earnings are roughly halfway through and we have another 135 S&P 500 companies scheduled to report this week. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, we have now seen 55% of S&P 500 companies report 3rd quarter earnings so far. Of them, 67% reported revenue above expectations while 74% have reported earnings above expectations. This week has some heavy hitters including Apple and Facebook.
Non-Farm Payrolls & Unemployment Rate: Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for October are scheduled to be released this Friday (11/3). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, the markets will likely go lower along with the US Dollar. Like in previous months, the Unemployment Rate may drop but average hourly earnings will continue to stagnate as additional part time workers at Amazon will only be paid minimum wage until a robot can do it for cheaper. As we learned last week, Amazon hired 160K people in the 3Q. So roughly half the jobs created in the US in the 3Q were by Amazon?
Bank of Japan: On Tuesday (10/31), the Bank of Japan will release a policy statement followed by a press conference. This will be the first statement since current Prime Minister Shinzo Abe won the latest election. With the election, Bank of Japan Governor Haruhiko Kuroda will likely be in charge of monetary policy for another 5 years after his current term is up next year. With him at the helm, investors do not expect a policy shift or for the Bank of Japan to announce any type of dial back of its huge stimulus program (Yay free money) any time soon.
Another Super Thursday for Bank of England: The Bank of England is scheduled on Thursday (11/2) to publish its policy decision, Inflation Report, Official votes and new forecasts or as they call it, Super Thursday (cause their Super, thanks for asking). The Bank of England Governor will also give us his latest outlook as to how the negotiations are going with Brexit. Comments around the negotiations could potentially strengthen or weaken the British Sterling.
Catalonia: The latest out of Spain has the Catalan Parliament voting for independence to form the Catalan Republic, an independent and sovereign country. We don’t know the full extent of what the Spanish Government reaction will be at this time, but there are fears it will involve a police state similar to what Francisco Franco implemented in his reign. So far they have implemented Article 155 and the Spanish Prime Minister has fired the Catalan President, Police Chief and entire Catalan government (sounds very Democratic to me). Spanish bonds will likely spike higher on the news as the Euro will dip with European banks and markets to likely go lower as the crisis continues. Also, will history repeat itself? The last time the Catalan Republic was declared back in 1934, there was a state of war for 10 hours, resulting in 46 dead in Barcelona.
All Saints Day & Culture Day: On Wednesday (11/1) in certain European countries such as France and Italy, banks will be closed for All Saints Day. Since it’s in the middle of the week, markets will likely not see outsized moves the day before or after the holiday in their respective countries, and the rest of Europe. Also this week, Japanese banks are closed for Culture Day on Thursday (11/2).