The answer my friend is blowing in the wind

Trump 2.0 is in full swing, and global stock markets generally applauded his return. The S&P 500 gained almost 2% in the week. European markets had a good week despite the uncertainty of trade tariffs. The FTSE 100 was a little lacklustre, finishing the week roughly where it started. The coming week will be an interesting test for money managers and the Federal Reserve. As Trump calls for lower prices, including oil, higher growth and cuts in interest rates, this week’s meeting may test the Fed’s resolve. In theory, much of what Trump proposes in economic policy would risk rates higher, not lower; the new administration will not well receive any rhetoric to that effect on Wednesday. As we know, the market is not expecting much in the way of cuts this year, possibly only one, but is definitely not banking on an increase.

The ECB will also meet this week and, and unlike the Federal Reserve, is expected to trim interest rates. The ECB’s decision is easier as the euro area economy struggles. The latest composite flash PMI for January for the eurozone did move marginally above 50. However, the average for the index since the summer has indicated a marginal decline. According to S&P’s weekly report, the flash PMIs also showed future output expectations continuing to run close to three-year highs in the US in January, contrasting with a far more subdued outlook in the eurozone. The Bank of England meets the following week. We will discuss what the MPC may do at that meeting later in the week; I bet that further indications of a softening jobs market and weakness in consumer spending and manufacturing will lend them to a cut despite the renewed threat of higher prices in the coming months.

There is not much economic data this week that will likely sway the Fed ahead of Wednesday’s decision. Durable goods, CB consumer confidence, and the Chicago Fed National Activity Index are probably the main ones. On Thursday, we get the first estimates for Q4 GDP for the eurozone and the US.

Earnings season gets into full swing this week. Five of the Mag 7—Tesla, Meta, Microsoft, Amazon, and Apple — are due to report in the coming days. ASML manufactures lithography machines that are key to making chips and so are used to help gauge semiconductor demand. Shell, LVMH, also report. So far, just over 15% of the S&P 500 have reported, many of them financials, but the season is off to a decent start. According to FactSet, in aggregate, companies have reported earnings that are 7.3% above estimates. After a weaker close in the US on Friday, European markets are starting the week on a downbeat note. Futures in the US are indicating a weak start

I plan to see the new Bob Dylan movie this week, which everyone tells me is very good.