US Elections 2024, FOMC Decision, Key Economic Indicators – The Week Ahead

The week ahead brings major economic events and political developments that could significantly impact the U.S. financial markets.

With the U.S. presidential and congressional elections on Tuesday, November 5, alongside essential economic reports, investors will be closely monitoring these events to gauge potential shifts in policy and market sentiment.

In this article, let’s explores the potential implications of the week’s economic data and the anticipated effects of a Trump victory on the stock market, including sector-specific impacts and investor sentiment.

Economic Reports to Watch: Key Indicators for the U.S. Dollar

The week’s data releases begin with the ISM Services PMI on Tuesday, expected to reflect growth in the U.S. services sector. Projected at 53.4, down from 54.9, the data could hint at a slowing economy.

On Wednesday, the Final Services PMI is forecasted to hold steady at 55.3, suggesting resilience in services despite broader economic uncertainty.

Crude Oil Inventories will also be released on Wednesday, offering insight into supply levels that may influence the energy sector.

On Thursday, November 7, the Unemployment Claims report is expected to increase slightly to 220,000 from the previous 216,000, a key data point for gauging labor market health and its impact on Federal Reserve policy.

• ISM Services PMI: Expected to drop to 53.4, reflecting slower growth.
• Final Services PMI: Projected at 55.3, signaling stability.
• Unemployment Claims: Anticipated rise to 220,000, signaling potential shifts in labor market strength.

Federal Reserve Rate Decision and Policy Outlook

On Friday, November 8, the Federal Reserve’s interest rate decision is expected to move the Federal Funds Rate from 4.75% to 5.00%.

The Federal Open Market Committee (FOMC) will release its policy statement, followed by a press conference that may offer additional insights into the Fed’s stance on inflation and economic growth.

Investors will closely analyze these releases for clues on future rate hikes or potential policy adjustments, which could influence the U.S. dollar and broader markets.

Election Outcome: Market Implications of a Trump Victory

Talking about US Elections, a potential victory for Donald Trump could bring both opportunities and risks to the stock market, particularly given his pro-business stance, focus on deregulation, and trade policy priorities.

While some sectors might benefit from reduced regulatory burdens, others may experience heightened volatility due to potential trade disruptions.

Sector-Specific Impact of a Trump Administration

If re-elected, Trump’s policies could have immediate implications for specific sectors:

• Energy: Trump has previously supported deregulation in the energy sector, favoring oil and gas firms. Under his administration, the sector saw significant gains due to policies aimed at boosting domestic production and reducing regulatory burdens (Forbes, 2019). Similar policies could lead to another increase in energy stocks, especially for companies focused on oil and gas exploration and production.
• Technology: During Trump’s first term, tariffs on Chinese imports directly impacted tech companies reliant on overseas manufacturing, including giants like Apple and Intel (Bloomberg, 2019). Renewed trade tensions and tariffs could increase production costs for tech firms with global supply chains, affecting both earnings and operational strategies.
• Financials: Trump’s 2018 rollback of parts of the Dodd-Frank Act was a boon for financial institutions, particularly small to medium-sized banks. This deregulation led to a boost in lending activities and profitability in the financial sector, which saw a 20% increase in stock prices in 2018 (Wall Street Journal, 2018). Another term could bring further deregulation, benefiting banks and finance companies by lowering compliance costs.

Broader Economic Effects: Fiscal Policy, Trade, and Investor Sentiment

A Trump victory could also lead to shifts in fiscal and trade policies, with far-reaching effects on corporate growth and investor sentiment:

• Fiscal Policy: Trump’s 2017 Tax Cuts and Jobs Act reduced corporate tax rates from 35% to 21%, significantly boosting corporate profits. The S&P 500 companies saw an average profit increase of around 11% following the tax cuts (CNBC, 2018). If similar policies were implemented again, corporate investment and stock buybacks could rise, improving shareholder value but potentially expanding the federal deficit.
• Trade Policy: Under Trump’s first administration, tariffs on Chinese goods increased operational costs for U.S. companies, particularly in manufacturing and retail, impacting $370 billion worth of Chinese imports (New York Times, 2019). If Trump reintroduces or escalates tariffs, multinational companies might face tighter profit margins, while consumers could see price increases on imported goods.

Conclusion: Navigating Market Risks and Opportunities

This week’s economic data and election outcomes will play a crucial role in shaping the U.S. financial markets. Investors should keep a close watch on the election results, the Federal Reserve’s statements, and key economic indicators to prepare for potential shifts in market direction. While a Trump victory may benefit certain sectors, the broader economic landscape remains uncertain, with both risks and opportunities for investors.

S&P 500 Index (SPX) – Technical Analysis

The S&P 500 Index (SPX) is exhibiting resilience after a dip toward its key support zone near the 38.2% Fibonacci retracement level around 5697, aligning with the 50-day EMA at approximately 5708.

This convergence suggests strong support and potential for a bullish rebound. Immediate resistance rests at 5765, followed by a higher barrier at 5813.

On the downside, the 50% Fibonacci level near 5642 may serve as the next line of support if the current bounce fails to hold.

A sustained breach of 5765 could lead SPX toward higher retracement levels, signaling renewed bullish momentum.