FOMC Decision Leads an Overloaded Week of Rate Decisions, Earnings and GDP

FOMC Decision Leads an Overloaded Week of Rate Decisions, Earnings and GDP

Talking Points:

• The FOMC is an anchor among major event risk ahead as a top market mover right in the middle of the week
• Anticipation may prove as much an influence on how the markets unfold as the reaction to major releases
• Rate decisions will also include the ECB and BOC, Earnings will steer into Magnificent 7 stocks like Apple and Microsoft, and 4Q GDP readings from the US and Eurozone are up

The week ahead is overloaded for high-level event risk. It is not just an even distribution of noteworthy economic indicators that can stir the interest of those tracking short-term event risk for immediate market reaction. We are looking at a docket of scheduled events that can alter the bearing of systemic themes and the potential for unscheduled updates (like details on tariffs) that can necessitate a significant redistribution of capital in the financial system. It is that steady release scheduled and the lurking threat of a politically-aimed upending of the natural order that may dictate the type of market that we experience ahead.

Individually, high level event with a distinct outcome can charge significant movement in a market. However, if the weight of a forthcoming event is equivalent or greater than the influence and impact of one that has just passed, the conviction needed to convert volatility into follow through can be seriously disrupted. That is not to say that we won’t see volatility through this minefield of a docket ahead of us. Rather, those bouts are more likely to struggle for traction across benchmarks like global indices and the US Dollar as attention quickly shifts to the next high-level release.

Calendar of Major Global Macro Events Scheduled for Week

Source: John Kicklighter, StoneX

 

Setting aside the ‘potential but unknowns’, the most prominent listing for global recognition and potential impact on my list is the FOMC rate decision on Wednesday at 19:00 GMT. The world’s largest central bank steering the world’s largest economy amid a shift in general policy trend and a high-pressure political backdrop is naturally going to pique the interest of most global-minded investors. Focusing first on the big picture of the event itself, the Fed is coming off multiple rate cuts that have played no small part in ramping up speculative enthusiasm via indices through the fourth quarter and into 2025. Now, the forecast is for the central bank to pause after it has already significantly downgraded its own forecasts as of the SEP (Summary of Economic Projections) update in December. Just how firmly has the group depressed the breaks? We will find out.

Table of Possible FOMC Policy Scenarios and Market Impact

Source: John Kicklighter

 

Given the density and even distribution of event risk this week, it is important to grade the listings that have the greatest overall potential of changing the underlying tides of capital flow globally. It is always possible that a less recognizable scheduled or unscheduled event can generate greater impact owing to the surprise of its outcome, but planning around the unpredictable is not a particularly productive strategy. If the Fed rate decision is the singularly most recognizable event for its potency ahead, monetary policy in general may cause meaningful shifts in capital flow more broadly.

The Fed is expected to hold its rates at this update which will intensify the focus on any indication of future course bearings. In contrast, the Bank of Canada rate decision due before the Fed and the European Central Bank rate decision after it are both expected to be lowered by 25 basis points –from 3.25 and 3.15 percent respectively. Given those expectations, a ‘hold’ here would denote more repositioning than the same from the Fed that sends observers splicing intentions from words.

Chart of Relative Monetary Policy Stance

Source: John Kicklighter

 

Another top-level thematic consideration from the docket ahead is the continuation of earnings season. The major banks and financial institutions have posted in the past two weeks and the general consensus was one of improvement. That group of players carries considerable sway over general sentiment in the equities market; but if there is any group that has a higher profile, it would be the top market cap, tech stocks also known as the ‘Magnificent 7’. The run begins just a few hours after the Fed decision with the third largest market cap’s, Microsoft, reporting. Meta and Tesla will be posting data at the same time as well for number six and seven on the top list. Apple, the largest ticker in the world, will report Thursday after the close, drawing out the focus later into the week.

Dow Jones Industrial Average with Apple and Microsoft (Daily)

Source: John Kicklighter, TradingView

 

One more macro theme that should be monitored – but one where the impact is far more uneven when it comes to control over sentiment – is the run of first-look 4Q GDP readings. While we have the likes of Germany, Mexico and Saudi Arabia among others; the real heft comes from the United States and Eurozone updates on Thursday – again note the time after the Fed decision. We had January PMIs from both top economies this past week which indicated positive growth into the new year, so it will be important to see how much innate focus is on these lagging readings as a baseline for a future complicated by trade wars.

Chart of Major Economies Composite PMIs (Monthly)

Source: John Kicklighter, TradingView

 

-- Written by John Kicklighter, Global Head of Content