Cyber Monday is here — the online equivalent of what Black Friday is for the shopping malls, kicking off holiday shopping season with tons of discounted products and services for this one-day period. We expect, if healthy online shopping numbers come in as expected today, that Monday’s market indexes will continue pushing higher. Both the S&P 500 and the Nasdaq exchange closed Friday’s shortened trading day at all-time highs, whereas the Dow closed a sliver beneath its all-time high.
Ahead of today’s opening bell, market indexes are hovering around unchanged; oil prices for both WTI and Brent have slid a bit, and stronger oil and gas prices has been a key ingredient in the latest leg of this long-run bull rally. Questions regarding the apparent power grab by the Saudi Crown Prince ahead of the next OPEC/Russia meeting later this week may be weighing on oil futures currently, although geopolitical issues usually don’t get translated immediately into whether stocks get bought or sold on a day-to-day basis.
Of course, here in the U.S. market participants will be paying close attention to Capitol Hill, where Republican senators will be attempting to reconcile its version of a new tax reform/tax cut program. Before Congress begins to consider the already-passed House version of the tax bill, the Senate will need to bring enough moderate — or libertarian — votes from its narrow majority in the upper chamber. Should progress be struck early, expect the market to respond favorably, with visions of sugarplums — er, a new tax reform law — passed through both houses by the end of the calendar year.
We also expect the Senate to approve a changing of the guard at Federal Reserve Chair: President Trump’s choice of Jay Powell to succeed retiring Janet Yellen (who will be stepping down from the board completely) should be passed easily. Preceding this, Ms. Yellen will be addressing the congressional Joint Economic Committee about her take on the future of the U.S. economy. Analysts will be parsing the Fed Chair’s language — which, like her predecessor Ben Bernanke, used more straightforward points of view in describing hopes and concerns than previous Fed Chairs — for indications regarding the Fed raising interest rates both next month and into 2018.
Speculation among some is that a more radical change is in store with Powell taking over as Fed Chair, much as we’ve seen a major re-think from the Obama administration on immigration policy, healthcare, climate change considerations, and so much more. In fact, while analysts currently expect two or three interest rate hikes in calendar 2018, Powell may take a different tack and steadfastly deny any rate hikes next year, promoting a cheaper dollar for longer. Further, we may see a halt on the balance sheet drawdown of the Fed’s $4 trillion-plus, which has only just begun under Chairwoman Yellen.
Considering all of this, a stronger-than-expected Q3 earnings season, healthy labor market and perception of lowered regulatory hurdles for U.S. business owners should prompt a positive revision to the latest GDP read at the end of this week — from 3.0% currently to a 3.2% consensus. This would become the first time the U.S. would have posted three consecutive 3-handle GDP reads in the last few years.
There is an old-timey expression that goes like this: “If ‘ifs’ and ‘buts’ were candy and nuts, we’d have Christmas every day.” Apparently we are living through just such an idyllic scenario in today’s marketplace — positive conclusions for market growth everywhere we turn, with Christmas season on the way, as well. It’s a sweet time to be in the market.
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Zacks Investment Research