Markets Play The Waiting Game

Tuesday, May 23rd, 2017

Market futures await a flood of new data from economic surveys, the Federal Reserve and the U.S. House Oversight Committee. Also, the Trump administration has released its 2018 budget proposal, which is being parsed currently by analysts, with opinions forthcoming.

Finally, a suicide bombing terror attack claimed by ISIS in Manchester, England claimed 22 lives and injured 59 more awaits reaction from the Western world, aside from President Trump calling the attackers “losers.” Prime Minister Theresa May has indicated the threat level for another attack in the U.K. is at “severe.”

Also, we expect a 1% drop in New Home Sales for April. This report will be released this morning, after the opening bell.

On Wednesday, we look for details on Fed minutes from the committee’s last meeting. Clarity on the group’s outlook for the U.S. balance sheet will accompany its thoughts on whether Q1 GDP weakness is transitory, as expected, or whether there may be some dampeners in the works toward the expected (in aggregate) 3% GDP growth in Q2.

Further, if this major economic figure goes even higher — the Atlanta Fed expects upwards of 4% growth, which at this point looks like an outlier — what does this mean for interest rate hikes, not only in June (currently considered a done deal) but in September?

Also on Wednesday, the House of Representatives’ Oversight Committee, chaired by Rep. Jason Chaffetz (R-UT), conducts a hearing which may include testimony from fired FBI Director James Comey, in what would be his first public appearance since his dismissal by President Trump. That dismissal generated a firestorm of leaks to the press and speculation reading the ongoing investigation into Russian interference in the 2016 General Election which may have benefited Trump.

Comey’s testimony is hotly anticipated, not only at tomorrow’s Oversight Committee hearing, but at the Senate Intelligence Committee, which reportedly will occur with Comey’s involvement sometime after Memorial Day.

The initial budget from the Trump administration looks to generate the biggest headlines this Tuesday, following its proposed $3.6 trillion in cuts over the next ten years — all in non-defense spending — including $1-2 trillion in tax cuts. This reportedly is expected to eliminate the U.S. deficit by 2027, with cuts exclusively split between discretionary and mandatory spending.

These cuts would include how the American citizenry would qualify for entitlements, particularly Medicaid, food stamps and disability pay-outs. At first glance, this appears to approach third-rail politics; these sorts of entitlements affect elder Americans disproportionately, which is the group that turns out the vote in consistently the biggest numbers. Thus, we might expect congresspeople to speak up on behalf of their constituencies regarding this budget and defeat most if not all of it sooner than later.

This budget would decrease the non-defense part of U.S. spending to its lowest levels in at least 55 years — which is how long ago these analyses have been in existence. There would seem to be plenty of grist for the mill for political backlash; anyone who might claim this proposal might pass unscathed should probably be taken with a big grain of salt.

Mark Vickery
Senior Editor

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