The market doesn’t believe Trump will follow through with them

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Doesn’t believe Trump will follow through: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

A Santa Rally Could Lead to a Sober January. Be Cautious—Not Bearish.

That is certainly the case when it comes to tariffs. So far the market has been largely ignoring their potential impact, as it “simply…doesn’t believe Trump will follow through with them,” to quote Sevens Report President Tom Essaye.

Also, click here to view the full Barron’s article published on December 2nd, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Market Multiple Table: December Update

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Market Multiple Table: December Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table: A New Influence That Could Increase Volatility in 2025
  • Unbranded, Shareable MMT PDF Upon Request

Stock futures are stabilizing after Monday’s modest pullback as trader focus shifts ahead to tomorrow’s CPI report. Small caps are leading in pre-market trade thanks to a surprisingly solid NFIB report released earlier this morning.

Economically, the NFIB Small Business Optimism Index surged 8 points to 101.7 in November, handily topping estimates of 94.5 to hit the highest level since June 2021. Overseas, German CPI met estimates at 2.2% y/y, another Goldilocks inflation report.

Today, there is one economic report to watch: Productivity & Costs (E: 2.2%, 1.9%). The data has an inflation component (specifically the “Costs” part) that could move yields today and influence stocks (higher yields will weigh on equities).

Additionally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and a few late-season earnings reports due out including AZO ($4.30), ASO ($1.25), and GME ($0.00).

The Treasury auction is another catalyst that could move yields and impact equities, but tomorrow’s CPI report is becoming the primary focus on the market as we progress through the week so market moves should be limited by trader positioning today.

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Why There’s A Clear Path for the Santa Rally

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Why There’s A Clear Path for the Santa Rally: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why There’s A Clear Path for the Santa Rally
  • Weekly Market Preview:  Do inflation metrics make a December rate cut guaranteed?
  • Weekly Economic Cheat Sheet:  CPI on Wednesday is the key report

Futures are slightly lower as geo-political unrest is slightly outweighing more stimulus promises from China.

Geopolitically, rebels overthrew the Assad regime in Syria over the weekend.  While this is a major geo-political event, the impact on markets is likely small given Syria isn’t a major oil exporter.

China’s officials promised an easier monetary policy bias and more fiscal stimulus over the weekend, boosting Chinese shares.

Today there are no notable economic reports nor any Fed speakers so focus will on be geo-politics and oil prices.  As long as the turmoil in Syria doesn’t push oil prices higher, it shouldn’t impact stocks.

 

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Jobs Day

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What’s in Today’s Report:

  • Jobs Day
  • Updated VIX Analysis

Futures are slightly lower following a mostly quiet night of news and ahead of today’s jobs report.

Economically, German Industrial Production missed expectations (-1.0% vs. (E) 1.5%) and became the latest underwhelming EU economic report.

Today focus will be on the jobs report and expectations are as follows:  200K Job-Adds, 4.2% Unemployment Rate, 3.9% y/y Wage Growth.  A “Goldilocks” job adds number is something around the 200k expectation or lower, as long as it’s not close to zero.  Anything in that range (with mostly in-line unemployment and wages) should “green light” a Fed rate cut in December and help fuel a Santa Rally.

Speaking of the Fed, there are numerous speakers today including Bowman (9:15 a.m. ET), Goolsbee (10:30 a.m. ET), Hammack (12:00 p.m. ET) and Daly (1:00 p.m. ET).  However, most of them have spoken recently and their message has been consistent:  A December rate cut is possible but not guaranteed and rates will come down over time.  As long as that’s the message from them today, they shouldn’t impact markets.

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Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are little changed following a mostly quiet night of news and mixed economic data.

European economic data continued to point to lack-luster growth.  German Manufacturers’ Orders (-1.5% vs. (E) -2.0%) and UK Construction PMI (55.2 vs. (E) 54.3) beat while Eurozone Retail Sales (-0.5% vs. (E) 0.0%) missed expectations.

Bitcoin rose above $100k for the first time in overnight trading, hitting a new milestone.

Today the focus will shift to employment ahead of tomorrow’s jobs report as we get Challenger Job Cuts (E: 55k) and Jobless Claims (E: 215K).  The key for both metrics remains Goldilocks readings (generally meeting expectations but not too weak or too strong).  Additionally, there is one Fed speaker today, Barkin (12:15 p.m. ET).

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A Unique ETF Focused on Managing Tax Liabilities

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What’s in Today’s Report:

  • A Unique ETF Focused on Managing Tax Liabilities
  • JOLTS Data Takeaways – Another Goldilocks Report

Futures are higher with tech shares leading thanks to solid earnings reports after the close yesterday as investors look past political turmoil overseas.

Politically, lawmakers in South Korea moved to impeach President Yoon for implementing martial law yesterday while the French government faces a no-confidence vote today. Neither situation is a material negative for markets but both are weighing on sentiment.

In corporate news, CRM and OKTA (a newer cloud software focused company) both posted solid earnings after the close yesterday which is bolstering the broader tech sector in premarket trade today.

Today, we will get two more important economic reports: The ADP Report (E: 165K) and the ISM Services PMI (E: 55.5). Factory Orders (E: 0.4%) will also be released but is less likely to move markets than the first two data points.

The Fed’s Musalem is scheduled to speak at 8:45 a.m. ET, however the market’s main focus today will be Powell’s commentary (1:45 p.m. ET) as he could shed light on December rate cut plans or the policy rate path in 2025. Any hawkish surprise from the Fed Chair could spur volatility today.

Finally there is one notable earning release today from discount retailer DLTR ($1.07) that could offer insight into consumer spending habits.

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Sentiment Divergence Between Advisors and Investors

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What’s in Today’s Report:

  • Sentiment: Divergence Appearing Between Investors and Advisors
  • ISM Manufacturing PMI Takeaways

Futures are little changed amid escalating U.S.-China trade tensions and ongoing political turmoil in Europe.

Overnight, China announced an export ban of specific rare minerals with military applications to the U.S. in the latest escalation of trade tensions between the two countries.

EU shares edged higher ahead of the French government’s “vote of no confidence” (tomorrow) linked to ongoing budget turmoil.

Looking into today’s session, there are two economic reports to watch: JOLTS (E: 7.49 million) and Motor Vehicle Sales (E: 16.0 million). Investors will want to see more “Goldilocks” data to support post-election growth optimism.

Additionally, there are two Fed speakers to watch: Kugler (12:35 p.m. ET) and Goolsbee (1:30 p.m. ET and 3:45 p.m. ET), and as long as they do not offer any hawkish surprises, stocks should be able to extend gains to new record highs today.

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One Last Hurdle for the Santa Rally

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What’s in Today’s Report:

  • One Last Hurdle for the Santa Rally
  • Weekly Market Preview: Can Goldilocks Data Offset Political Volatility?
  • Weekly Economic Cheat Sheet: The Last Big Week of 2024

Futures are slightly lower on political volatility as Trump issued more tariff threats and made another unorthodox cabinet appointment while President Biden pardoned his son Hunter.

Trump threatened 100% tariffs on BRICs countries (Brazil, Russia, India, China) if they abandon the U.S. dollar. In addition, Trump made another unorthodox cabinet pick with Kash Patel as FBI Director.

Finally, President Biden reversed course and gave an unconditional pardon to his son Hunter, sparking bi-partisan criticism.

Today focus will turn from politics to actual economic data and the key report today is the ISM Manufacturing PMI (E: 47.6).  As has been the case, an in-line to slightly soft number would be the best case for stocks as it wouldn’t signal any further deterioration in the manufacturing sector and, at the same time, keep a Fed rate cut more likely than not.

We also have two Fed speakers today, Waller (3:15 p.m. ET) and Williams (4:30 p.m. ET) and any commentary that makes a December rate cut more likely will be a positive for markets.

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More Trade Volatility

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What’s in Today’s Report:

  • More Trade Volatility

Futures are modestly higher as trade tensions eased following a call between Trump and the President of Mexico.

Late Wednesday Trump announced that he had a “productive” call with Mexico’s President while Canada announced measures to strengthen the border, easing trade tensions between the three countries.

Economically, the EU flash HICP (their CPI) was slightly better than expected, rising 2.7% y/y vs. (E) 2.8%.

Today should be a quiet day as there are no notable economic reports and markets close at 1:00 p.m. ET.

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What Credit Spreads Are Saying About the Economy

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What’s in Today’s Report:

  • What Credit Spreads Are Saying About the Economy

Futures are little changed despite more trade threats from President-elect Trump overnight.

After the close, Trump stated he’d apply a 25% tariff to all goods from Mexico and Canada and an additional 10% tariff on goods from China, again reminding investors that not all proposed policies are market friendly.

Focus today will be on economic data and earnings and it’s likely to be the last potentially busy day of the week given the looming holiday.

The key report today is the FOMC Minutes (2:00 p.m. ET) which will give us insight into the November Fed decision.  Any commentary in the minutes that makes a December rate cut less likely will be a modest negative for stocks, while a strong sense of commitment for additional cuts will be a positive.  Other reports today include the Case-Shiller Home Price Index (E: 4.8%) and New Home Sales (E: 725K),

Finally, there are important retail and tech earnings today and some reports we’ll be watching include: BBY ($1.30), DKS ($2.68), DELL ($2.05), HPQ ($0.94).

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