In the current week, US equity investors are set to concentrate on pivotal factors such as the ongoing discussions regarding the forthcoming Trump administration's policies, the Federal Reserve's easing strategy, and crucial macroeconomic data in advance of the upcoming Q4 earnings season. These elements are essential as they will shape the momentum of markets that are currently navigating near record highs. President-elect Donald Trump's aspirations for the United States are poised to have significant implications for global trade dynamics, interest rates, and inflation.
Investors are on alert for the initial insights into the formulation of these policies as Trump's return to the White House on January 20 approaches. Increased tensions with China are anticipated as the two leading economic powers engage in negotiations regarding tariffs, which are likely to occur before the potential tax cuts Trump pledged during his campaign come into effect. In a notable development earlier this month, the Federal Reserve recalibrated its forecast for interest-rate reductions for the next year, slashing its expectations from four to two cuts, while simultaneously reducing its target rate by 25 basis points to a new range of 4.25% to 4.50%.
Moreover, the central bank has elevated its inflation outlook for 2025. It has also revised its neutral rate forecast upwards, indicating a policy environment likely to remain elevated for an extended duration. Investors are expected to scrutinize this week's incoming data to gauge the robustness of the US economy and its sustainability going forward. On Monday, the economic data docket includes the Chicago PMI report along with pending home sales figures.
Significant reports slated for Tuesday comprise the Redbook same-store sales data. Following the New Year’s holiday on Wednesday, Thursday’s agenda features weekly mortgage applications, weekly jobless claims, and S&P Global manufacturing data. The week is set to conclude with ISM manufacturing data, which will further elucidate the economic landscape. As we approach the end of 2025, the three major stock indices are falling a bit short of record heights, with notable upticks observed in the Nasdaq Composite, the Dow Jones Industrial Average, and the S&P 500, yielding gains of over 31%, 14%, and 25% respectively.
This trajectory positions them for their most remarkable year since 2021, as per insights provided by FXLeaders. The earnings season is anticipated to commence in the second week of January with pervasive interest in the performance of the so-called Magnificent Seven companies, which have collectively functioned as a significant catalyst for market gains throughout the year..