Respect My Executive Authoritah

Investors will be watching President Trump’s first few days in office to get a better sense as to what policies his administration may have and to see what executive actions he signs. On the economic front, we have PMI readings, Durable Orders and Advance GDP.

Executive Authority: In the next few days, President Trump will start issuing executive orders that could affect certain sectors. At this time it is unknown which ones he will sign. However, when he does, investors may see movements in certain sectors that are affected by the actions. So far, Trump has mentioned that he wants to renegotiate NAFTA. From this, we shall see reactions in the US Dollar and companies that have factories in Mexico and Canada.

Earnings: Earnings season picks up with 105 S&P 500 companies expected to report Q4 earnings this week. Traders can see individual stocks have huge price swings if a company’s earnings outpace or fall short of what the street expected. According to Thomson Reuters I/B/E/S, of the 62 S&P 500 companies that have so far reported, 44% reported revenue above expectations while 65% have reported earnings above expectations. 44% is low as a typical quarter sees 59% of companies beat on revenue, but better than last week.

Brexit Update: Before the US markets open on Tuesday (1/19), the United Kingdom’s High Court is scheduled to announce a ruling on the government’s ability to bypass Parliament and trigger Article 50 of the Lisbon Treaty. If they rule that the gov’t can bypass Parliament, we will expect to see UK stocks rise while European stocks head lower. The British Pound and the Euro will also weaken. Should the High Court rule they have to go through Parliament, there is a slight chance that Brexit may not happen. In this scenario, UK stocks will weaken, with stocks in Europe climbing. The Pound will also strengthen and so will the Euro.  

Manufacturing PMI: PMI readings from across the globe are due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.

GDP First Release: On Friday (1/27), we get our first release of US GDP for the 4th quarter. Should the number come in higher than expected, we can expect to see equities go higher. If GDP is less than expected, we may see equities fall as investors believe the economy is not growing as fast as expected. Last quarter saw a growth of roughly 3% in GDP. However, 1% of that was from Soybean exports (South America had a poor harvest last year). Investors will look to see if it is again soybean exports making up a significant portion of the increase. If this is the case, the White House will obviously spin it saying it is optimism around Trump’s election victory.

Still waiting on 20K or $20 Trillion: It has now been 6 weeks since the Dow first came within 100 points of the elusive 20K mark. Strong resistance has also contributed to the pullback. Investors will continue to watch to see if the Dow can pass this elusive mark. If the Dow continues to struggle, speculators may push gold higher. Gold is currently up over 5% this year.