The Week Ahead

U.S. stock indexes are set to open slightly higher on Monday as investors seek clarity about the fundamentals of the market heading into 2017 which comes after the U.S. Federal Reserve raised interest rates last Wednesday for the second time in nearly a decade and projected that rates will move higher next year compared to earlier estimates.

During the conclusion of the Fed’s 2 day December monetary policy meeting on Wednesday, policymakers at the Fed projected that the median target range for the federal funds will be 1.4 percent in 2017, higher than the 1.1 percent median projection from their September policy meeting, revealing there are growing expectations for more rate hikes next year.

After the Fed’s 0.25 basis point hike last week, the federal funds interest rate will be 0.50 – 0.75 percent at the beginning of 2017.

Fed Chairwoman Janet Yellen said that economic growth has picked up since the middle of 2016, household spending continues to rise at a moderate pace, but business investment remains soft, despite some recent stabilization in the energy sector.

Yellen admitted that policymakers at the Fed expect inflation to rise to the Fed’s 2 percent inflation goal during the next couple of years as transitory influences of earlier declines in energy prices and import prices continue to fade, and as the job market strengthens further.

Yellen acknowledged that fiscal policy from lawmakers in Washington D.C remains unclear at this point even as investors place their hopes on aggressive tax cuts, lower regulations, and possible infrastructure spending from a Trump administration that still needs some level of bipartisan support.

U.S. stocks have rallied following the outcome of the U.S. presidential election which saw Trump winning 74 more electoral votes than Clinton despite losing the popular vote by 2.8 million, a record margin.

Since the outcome of presidential election in early November, the Dow is up 7 percent and the S&P 500 has risen 5 percent.

On Friday U.S. stocks dipped slightly after a China Navy ship seized an underwater unmanned U.S. drone in the South China Sea.

Today investors will pay attention to Fed Chairwomen Janet Yellen labor speech this afternoon in Maryland for more insight about the health of the U.S. labor market and the overall economy.

The electoral college is also convening today with final electoral votes coming forward and expectations are that Trump will exceed the 270 threshold needed to win the U.S. president election.

The Week Ahead- Economic Calendar 

Economic data will be relatively light this week ahead of a shorted trading week next week due to the Christmas holiday in the U.S. which will be observed on Monday.

On Wednesday existing home sales for November will be reported.

Economists from have a consensus forecast of a 5.50 million increase after adding 5.60 million in October.

Thursday will be a busy day in the market with a variety of economic reports due including the 3rd estimate of Q3 U.S. GDP, Durable Orders for November, initial and continuing claims, the Fed’s preferred inflation gauge, PCE for November, and the FHFA Housing Price Index for October.

Economists from have a consensus estimate that the 3rd estimate of U.S. GDP will show the U.S. economy expanded by 3.3 percent in Q3 of 2016 after rising 3.2 percent in the 2nd estimate.

On Friday new home sales for November and Michigan Sentiment (Final) for December comes into view.

The estimate for new home sales includes a gain of 573, 000 after gaining 563,000 in October.

Written By:

John Schweitzer


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