Investors have a busy week ahead and will pay close attention to President Trump’s first State of the Union address this year on Tuesday evening and a Federal Reserve interest rate decision at the conclusion of their 2 day monetary policy meeting that wraps up on Wednesday January 31st with no scheduled press conference from the Fed Chair.
The Federal Reserve is not expected to raise interest rates during their monetary policy meeting this week.
President Trump is expected to speak positively about the U.S. economy, including the U.S. unemployment level being at a 17 yr. low, and the successful passage late in December in Congress of a large scale Republican tax cut plan for corporations and individual Americans that also includes the elimination of the individual mandate from the Affordable Care Act or Obamacare.
Although Republicans lacked enough final votes earlier in 2017 to repeal and replace the Affordable Care Act, they still managed to eliminate the individual mandate which required all Americans to purchase healthcare insurance that was attached to their tax reform package.
President Trump will likely address his efforts to lower federal regulations to create a more pro-business climate and speak about the need for bipartisan cooperation to approve a new infrastructure package which comes at a time when the federal deficit is at an all-time high, over 20 trillion, and last Monday lawmakers in Congress narrowly approved a short-term stop gap spending bill that only runs through February 8th to avert a federal government shutdown.
A host of Senate Democrats broke ranks and voted in favor of the current stop-gap spending bill lasting until February 8th after Senate Majority Leader Mitch McConnell pledged to address the fate of DACA or Deferred Action of Childhood Arrivals, from the Senate floor for an open debate.
DACA, immigration reform, and the construction of a southern border wall are some of the other topics that President Trump will likely address in his State of the Union address on Tuesday.
President Trump’s “American First” agenda will become a talking point, including his interest in re-negotiating NAFTA, a multi-lateral trade agreement reached in the 90’s between the U.S., Canada, and Mexico.
His recent decision to slap tariffs on imported solar panels from China and washing machines from South Korea could become another topic of discussion.
President Trump may also cite a new economic report from the Department of Commerce that was released on Friday showing the U.S. economy grew 2.3 percent in 2017, compared with an increase of 1.6 percent in 2016.
During the 4th quarter of 2017, the U.S. economy grew 2.6 percent, below 3.2 percent in the 3rd quarter.
Sen. Bernie Sanders
During an interview on CBS’s Face the Nation, Sen. Bernie Sanders (I-Vermont) was asked about President Trump’s big achievement to approve an ambitious tax cut package that includes lowering the corporate tax rate from 35 percent to 21 percent and the doubling of the standard deduction for Americans.
Sen. Sanders admitted that everybody should be pleased when some U.S. corporations hand out one thousand dollar bonuses to their employees but pointed out that the newly approved tax cut plan adds 1.4 trillion to the federal deficit and at the end of 10 years, 84 percent of the tax benefits will go to the top 1 percent.
Concerning DACA and border security, Sen. Sanders said that building a new border wall is not so smart today when we have technology that is much more effective and more cost effective in terms of protecting the border.
He predicted that you’re going to see a lot of debate about how much money we should spend on border security which comes after President Trump has just requested 25 billion to build a new southern border wall alongside stricter immigration reforms in return for offering 1.8 million “Dreamers” or DACA recipients a pathway to U.S. citizenship in the future.
The Week Ahead
Besides the Fed meeting that concludes on Wednesday, the week ahead will be a busy one and filled with economic data, including the January non-farm payroll job report on Friday and a series of tech earning reports.
Amazon, Apple, and Alphabet (Goog) report their quarterly earnings report on Thursday after the closing bell. Microsoft reports their earnings report on Wednesday and McDonald’s reports on Tuesday.
Sony and Sprint report on Friday.
Monday- Personal Income and Outlays (December) 8:30 a.m. EST
Tuesday- Fed Meeting Begins, S&P Corelogic Case-Shiller- Housing Index (Nov.), Consumer Confidence (Jan.)
Wednesday- January Fed policy meeting concludes, ADP (private sector employment report-Jan.), Chicago PMI, Pending Home Sales Index, Petroleum Report
Thursday- Weekly Jobless Claims, Productivity and Costs, IHS-Markit- PMI (Eurozone, U.S.), PMI, ISM Mfg Index, Construction Spending, Natural Gas Report, Fed Balance Sheet
Friday- Non-farm payroll report (Jan.), Consumer Sentiment (Jan.), Factory Orders (Dec.)
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