Good, Bad, & Ugly Market Scenarios

What’s in Today’s Report:

  • Good/Bad/Ugly Scenarios: Likely Market Reactions (Print this Table)

Stock futures are bouncing modestly as investor sentiment improved o/n amid reported progress on one front of the trade war while the markets await Fed comments today.

There were two positive headlines on U.S.-Mexico trade overnight.

First, Republicans in Congress are working to block Trump’s tariff plans and second, the Mexican government has already stepped up border security, showing cooperation on the main demands from the White House.

Meanwhile the RBA cut rates as expected, but the move is adding to the dovish tailwind that has helped markets stabilize so far this week.

Today, there are a few data points to watch: Motor Vehicle Sales (E: 16.9M) and Factory Orders (E: -0.8%), but the markets main focus will be on the Fed as there are several speakers: Williams (8:30 a.m. ET), Powell (9:55 a.m. ET), Brainard (3:45 p.m. ET).

Powell will clearly be the most closely watched, however any further hints at a potential rate cut in the near term will be received positively by the market. Conversely if Bullard’s dovish comments from yesterday are contradicted, stocks could easily turn back negative on the week.

What Mexican Tariffs Mean for Markets

What’s in Today’s Report:

  • What Mexican Tariffs Mean for Markets (New Worst Case Scenario)
  • Two Leading Indicators of Market Contagion We’re Watching
  • Fed Policy Update
  • EIA/Oil Outlook

Futures are down 1% as President Trump announced tariffs against Mexican imports in response to the border crisis, while Chinese economic data missed expectations.

Trump announced a 5% tariff on Mexican imports in June  and rising each month there after until they hit 25%.

The March Chinese manufacturing PMI missed estimates at 49.4 vs. (E) 49.9 adding to global growth worries.

Today the key number is the Core PCE Price Index (E: 1.6% yoy) and if that number prints stronger than estimates, expectations for a Fed rate cut will drop further and given everything else happening today, markets could get ugly.  Conversely, a soft inflation number will increase calls for a rate cut, and stocks could steady on that news.

The other key event today is a speech by New York Fed President Williams, and markets will want to see if he has a dovish tone following the tariff announcement and recent soft data (if he does, that’s a positive).