Investors are focusing on upcoming inflation data for clues on how the economy may shift after the election results
In the wake of a landmark week for markets following Donald Trump’s commanding win in the U.S. presidential election, investors are now turning their gaze toward upcoming inflation data for insights into how the economic terrain may shift in response to the election results. Additionally, market participants will have the chance to hear from a number of Federal Reserve officials following last week’s interest rate cut. Here’s what lies ahead for the markets in the week to come.
CPI
Investors will be closely monitoring Wednesday’s U.S. inflation data for October, as markets anticipate whether president-elect Trump will advance economic policies that could lead to inflationary pressures. Economists predict that the consumer price index will have increased at an annual rate of 2.4 percent in October, matching the pace of September. The annual rise in September was the smallest in over three-and-a-half years, reinforcing expectations for a Fed rate cut.
However, the central bank may face unexpected challenges following Trump’s election, as many believe his proposals, particularly higher tariffs, could elevate consumer prices. Following the Fed’s 25 basis point rate cut on Thursday, Chair Jerome Powell provided little insight into the pace and extent of future rate reductions.
Market rally to face inflation test
Market observers will be eager to see if this week’s inflation figures will help sustain the record-breaking stock rally that received a boost from Trump’s election victory. The benchmark S&P 500 soared to an all-time high, reaching the 6,000 mark for the first time on Friday, as optimism over tax cuts and relaxed regulations under Trump enhanced risk appetite. A positive economic outlook from the Fed, which implemented a widely anticipated 25 basis point rate cut on Thursday, also contributed to improved sentiment. However, the central bank’s capacity to continue cutting rates will be scrutinized based on whether incoming data indicates ongoing moderation in inflation.
Anticipating Powell’s remarks
Investors will have the opportunity to hear from several Fed officials this week, beginning with Governor Christopher Waller on Tuesday. Richmond Fed President Thomas Barkin and Philadelphia Fed President Patrick Harker are also scheduled to speak on the same day. Market participants will likely pay closer attention to comments from officials following Wednesday’s inflation report, starting with Dallas Fed President Lorrie Logan, St. Louis Fed President Alberto Musalem, and Kansas City Fed President Jeff Schmid. Fed Chair Jerome Powell is expected to deliver remarks that will be closely watched on Thursday. Additionally, New York Fed President John Williams will conclude the week’s speaking schedule later that day at an NY Fed event focused on “Making Missing Markets.”
“The Fed’s decisive move to cut interest rates again coupled with a quick U.S. election outcome introduces a mix of clarity and uncertainty concerning future economic and policy directions in the U.S.,” noted Kareena Moledina, client portfolio manager at Janus Henderson Investors.
Moledina further added that, “It may be premature though to claim supremacy in the battle against inflation. There is a risk to assuming inflation is in the rear-view mirror. We believe the Fed will remain steadfast in ensuring inflation has truly collapsed.”
Bitcoin hovering near $90,000
Bitcoin is on the brink of hitting $90,000 for the first time, fueled by expectations that Trump will introduce more crypto-friendly regulations. The world’s largest cryptocurrency reached a record high of $89,637 in Asia, representing an increase of over 25 percent since November 5, the day of the U.S. election. As of 6:11 GMT, Bitcoin has experienced a slight decline, dropping 0.45 percent to $88,368.
During his campaign, Trump pledged to establish the U.S. as the “crypto capital” of the world by creating a strategic Bitcoin stockpile and appointing more favorable regulators. He emerged from last Tuesday’s election in a stronger-than-expected position, with his Republican Party controlling the Senate and nearing a slim majority in the House.
Bitcoin also received support after Jay Powell indicated on Thursday that the Fed’s approach would remain unchanged amid near-term political shifts in the U.S. His comments contributed to gains across various risk-driven assets, including cryptocurrencies.
Bitcoin’s significant growth over the past week is noteworthy, observed Mohamed Hashad, chief market strategist at Noor Capital, especially with the upcoming election influencing market dynamics. Hashad emphasized former President Trump’s promotion of World Liberty Financial, a crypto venture involving family members, highlighting the link between politics and cryptocurrency.
The crypto sector has made substantial contributions to the election, added Hashad. “Bitcoin’s future price movement is uncertain, but the potential impact of market maker hedging on its trajectory cannot be overlooked. As Bitcoin approaches the $90,000 to $100,000 range, investors should closely monitor market dynamics and be prepared for potential price volatility,” Hashad further highlighted.
Read more: Oil prices steady as China’s stimulus disappoints, U.S. supply fears ease
Oil prices
Oil prices declined on Friday, November 8, as China’s recent stimulus measures left energy traders unimpressed; however, despite the losses, prices still managed to secure a weekly gain. U.S. crude futures settled at $70.35 per barrel, down by 2.7 percent. Global benchmark Brent crude futures fell by 2.3 percent to $73.87 per barrel.
Prices experienced another drop this week on Monday but stabilized on Tuesday. Chinese authorities announced a package aimed at easing debt repayment pressures for local governments, but analysts noted that these measures would do little to directly stimulate demand. Deflationary trends in the Chinese economy have significantly impacted oil prices this year. Nevertheless, prices concluded the week higher amid expectations of stricter sanctions on Iran and Venezuela under the incoming Trump administration, which could reduce oil supplies in global markets. Prices also received a boost from Thursday’s Fed rate cut, as interest rate reductions typically enhance economic activity and energy demand.
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