Financial markets have continued to assess the implications of a second Trump presidency, attempting to ascertain version 2.0’s priorities through appointment announcements for the incoming administration. The dollar has continued to rally strongly with a seven week win streak but is now looking stretched. Treasury yields have also risen as a Republican majority, albeit a slim one, was confirmed for the House of Representatives. That gives President Trump more freedom to implement his agenda, centred around lowering taxes, deregulation and reducing immigration. Nominees for Treasury Secretary and confirmation of the Trade Representative will be watched this week.
There’s no top tier US data to move bets on the December FOMC meeting. This swung closer to a coin flip after Fed Chair Powell’s relatively hawkish comments pointing to a more gradual path of policy easing. Global PMIs will be assessed to see if manufacturing is showing more signs of bottoming out. The euro could very much do with some cheer after slumping around 5% from more than one -year highs in September. The key long-term low from October 2023 sits at 1.0448.
The record-breaking stock rally paused last week as investors digested what the new US administration will do first. Eyes will be on the earnings season, which is nearing an end, with heavyweight megacap Nvidia reporting after the US closing bell on Wednesday. The near 200% surge in the stock price has raised the bar quite high for more earnings outperformance. Consensus sees third quarter revenue increasing by over 80% to $32.9 billon. A slip-up would hit the indices hard, due to the megacap’s hefty weighting.