After ordering the latest gadgets on Cyber Monday, investors have a busy week ahead highlighted by a potential floor vote on tax reform. We also have an OPEC meeting to discuss continued production cuts. On the economic front, we have Prelim GDP and ISM Manufacturing PMI.
Tax Reform: It looks like the Senate is planning to have a floor vote this Thursday (11/30) on passing tax reform. When they do finally vote, it could go all night. If this were to pass in the senate, the immediate thought is that the markets will spike higher on the news. There is speculation that the market may have already priced in its passage, but we could see short term movements higher. if the Senate is unable to get enough votes to pass tax reform, we will likely see markets fall and a move in to safe havens such as Gold, the Japanese Yen, and now Bitcoin since passage has likely been priced in. However, this will initially be a knee jerk reaction as the Senate will try to vote again and will try to work together to pass a resolution. If they repeatedly fail to pass any resolution or they pass a watered down version which makes the tax cuts temporary, instead of permanent, we will likely see markets pull back. And the closer they come without passing a resolution as we approach the budget deadline of December 8, we will likely see markets pull back even further.
OPEC Meetings: On Wednesday (11/29), OPEC meets in Vienna. Investors will likely hear some of the talking points coming out from Russia and Saudi Arabia before the meeting and will likely have time to react before the actual meeting. If not, we will wait for the latest out of the official meetings. If OPEC does decide to extend production cuts between its members, we can expect a spike in the price of oil. Markets will react by going higher on the back of the energy sector. Sectors such as transportation where oil is a significant cost to their company’s bottom lines could react negatively to an agreement.
GDP Second Release: On Wednesday (11/29), we get our second or preliminary release of US GDP for the 3rd quarter. Each quarter, we get 3 releases, Advance, Preliminary and Final. The first release is the most impactful. However, if a line item were to surprise in the Preliminary reading, the markets can react accordingly. The first release came in at 3.0%, better than expectations. If we get better than expected information with this reading on the consumer, we can expect to see equities go higher and the US Dollar to strengthen. If the consumer comes in weaker, expect equities to fall.
Black Friday & Cyber Monday: Investors will get their first readings (and latest death count) into how Black Friday and Cyber Monday sales went over the course of the weekend. Should sales disappoint, we can see certain retailers fall on the news. Conversely, if sales beat expectations, we can see a spike in certain firms.
Fed Members Speak: This week, we have 4 FOMC member scheduled to speak including the Fed chair. Janet Yellen is expected to provide testimony at the Joint Economic Committee. With one foot out the door, we may hear some insight she may not normally discuss as she departs the Fed early next year potentially effecting markets and the US Dollar.
Fed Chair Hearing: On Tuesday, (11/28) Jerome Powell has his hearing to be the new Federal Reserve Chair. Since the Republicans have the majority on the Senate Banking Committee, it should be smooth sailing for Jerome Powell during the hearing. However, if some comments or information comes out, or a poor performance affects his nomination, we could potentially see markets fall.