Investors will be watching the latest rhetoric out of the White House as President Trump is scheduled to sign tariffs on steel and aluminum this week. We also have a statement from the Bank of Japan where they may announce that they are taking away the punch bowl (a significant change to monetary policy.) On the economic front, we have Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.
Tariffs: I’m not really sure how having tariffs for goods imported into the US is a good idea. We don’t live in a bubble where the other side won’t take counter measures, but that is what is likely to happen after President Trump is to officially announce tariffs on imports of aluminum and steel. The markets reacted accordingly and dropped. Investors will watch to see if certain countries announce counter tariffs to offset what President Trump announced. Whatever they announce, we can expect that company or sector to potentially take a hit. If China wants to end this ridiculous rhetoric, they could just say they are going to stop buying US Treasury’s, and that would stop the tariffs in its tracks.
Bank of Japan: On Thursday (3/8), the Bank of Japan will release a policy statement followed by a press conference. The Bank of Japan Governor Haruhiko Kuroda may announce an exit from monetary stimulus as early as 2019. If we see an announcement to dial back its huge stimulus program (ahem free money) we will likely see markets in Japan and around the world fall. The Bank of Japan bought assets that were equivalent to almost 1 years’ worth of Japan’s GDP. (Imagine the Fed instead of just buying MBS and Treasury’s bought $10 trillion USD worth of US stocks) Should that disappear, we are likely to also see a jump in bond yields and a strengthening of the Japanese Yen.
Non-Farm Payrolls & Unemployment Rate: Change is not good. Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for February are scheduled to be released this Friday (3/9). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we may see in this instance the markets go lower as we expect inflation to climb higher and Treasury yields spiking higher. The US Dollar would also go lower along with oil on decreased demand. Should these numbers disappoint, the markets may go higher. Additionally, as in previous administrations, spikes in the Unemployment rate or not enough jobs being created will be blamed on the winter weather.
So Many PMI readings: Flash Manufacturing PMI readings from across the globe are due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.
WildCard: With so many people leaving the Trump administration, none really matter to the stock markets except 1, Gary Cohen. Gary Cohen is the head of President Trump’s National Economic Council. He was a big driver of the tax cut but was also very vocal about not having a tariff. If Cohen becomes fed up with everything (like every other person in Celebrity Apresident), he may leave the administration. If this were to happen, we will likely see the broader markets tank significantly as the Goldman alum brought a lot of confidence to the markets as to Trumps fiscal policies.