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| Top 5 things to watch in markets in the week ahead |
The week ahead is packed with events that could move the markets, from the Federal Reserve’s first meeting of the year to the latest U.S. jobs report. In this article, we will highlight the top 5 things to watch in markets in the week ahead and how they could affect your investments.
1. Fed decision and Powell press conference
The Federal Reserve will
announce its monetary policy decision on Wednesday, followed by a press
conference by Chair Jerome Powell. The Fed is widely expected to keep its
interest rate and asset purchase program unchanged, as it continues to support
the economic recovery from the pandemic. However, investors will be looking for
any hints on the Fed’s outlook for inflation, growth, and tapering, as well as
its views on the recent market volatility and fiscal stimulus.
The Fed’s tone and
guidance could have a significant impact on the markets, especially on the bond
yields, the dollar, and the stock valuations. A dovish Fed could boost the risk
appetite and lift the stocks, while a hawkish Fed could trigger a sell-off and
a flight to safety.
2. Big tech earnings
The earnings season will
continue with some of the biggest names in the tech sector reporting their
quarterly results. Among them are Apple, Microsoft, Facebook, Tesla, Amazon,
and Alphabet, which together account for more than 20% of the S&P 500
index. These tech giants have been the main drivers of the market rally in the
past year, as they benefited from the increased demand for online services,
cloud computing, and digital devices amid the pandemic.
However, they also face
some challenges, such as regulatory scrutiny, antitrust lawsuits, rising costs,
and competition. Investors will be looking for any signs of slowing growth,
margin pressure, or guidance cuts, as well as any positive surprises, new
product launches, or strategic moves. The tech earnings could set the tone for
the overall market sentiment and performance, as well as the sector rotation
and valuation trends.
3. U.S. jobs report
The U.S. labor market
will be in focus on Friday, when the Bureau of Labor Statistics will release
the nonfarm payrolls report for January. The report will provide the latest
snapshot of the employment situation in the U.S., which is a key indicator of
the economic health and recovery. The report will also influence the
expectations and actions of the Fed and the government regarding the monetary
and fiscal policies.
The consensus forecast
is for the U.S. economy to add 50,000 jobs in January, after losing 140,000
jobs in December, which was the first decline since April. The unemployment
rate is expected to remain unchanged at 6.7%, while the average hourly earnings
are expected to rise by 0.3% month-over-month and 5.1% year-over-year. However,
the report could surprise in either direction, depending on the impact of the
coronavirus surge, the vaccine rollout, and the stimulus measures on the labor
market.
A strong jobs report
could boost the market confidence and optimism, while a weak jobs report could
raise the concerns and uncertainty. A mixed jobs report could have a mixed
effect on the markets, depending on the interpretation and reaction of the
investors.
4. Coronavirus developments
The coronavirus pandemic
will remain a major factor that affects the markets, as the global cases and
deaths continue to rise and new variants emerge. The markets will be closely
monitoring the developments and trends of the virus spread, the lockdown
measures, the vaccine distribution, and the testing and tracing efforts, as
they have implications for the economic activity, consumer behavior, and
corporate earnings.
The markets will also be
paying attention to the news and updates on the vaccine efficacy, safety, and
availability, as well as the potential challenges and risks, such as supply
shortages, distribution bottlenecks, logistical issues, or adverse reactions.
The markets will be looking for any signs of progress or setbacks in the fight
against the virus, as they could affect the market mood and outlook.
5. Global events and data
Besides the U.S. events
and data, there are also some important events and data from other parts of the
world that could influence the markets. Some of them are:
- The European Central Bank will announce its monetary
policy decision on Thursday, followed by a press conference by President
Christine Lagarde. The ECB is expected to keep its policy stance
unchanged, after expanding its stimulus program in December. However, the
markets will be looking for any clues on the ECB’s assessment of the
economic outlook, inflation, and exchange rate, as well as its readiness
to act if needed.
- The U.K. will publish its fourth-quarter GDP report on
Friday, which will show the impact of the Brexit uncertainty and the
coronavirus restrictions on the British economy. The consensus forecast is
for the U.K. economy to contract by 8% year-over-year and 1.4%
quarter-over-quarter, after growing by 16% in the third quarter. The
report could affect the market sentiment and the pound sterling, as well
as the expectations and actions of the Bank of England, which will hold
its next meeting on February 4.
- China will release its official and Caixin
manufacturing and services PMIs for January on Sunday and Monday,
respectively. These surveys will provide the latest insights into the
activity and sentiment of the Chinese factories and firms, which are the
main drivers of the Chinese and global growth. The markets will be looking
for any signs of strength or weakness in the Chinese economy, as well as
the impact of the coronavirus resurgence and the Lunar New Year holiday on
the production and consumption.
These are the top 5
things to watch in markets in the week ahead, but there are many more factors
that could influence the market sentiment and performance. To stay updated on
the latest market news and analysis, subscribe to our newsletter and follow us
on social media.
Sources:
- Fed decision: What to know in the week ahead
- Big Tech Earnings: What to Watch
- U.S. jobs report: What to know in the week ahead
- Coronavirus live updates: Here’s what to know today
- ECB Preview: Lagarde unlikely to rock the euro boat,
three reasons to expect no change
- UK GDP: what to expect from the Q4 figures
- China’s economic recovery to quicken in fourth quarter, herald stronger 2021