The tip on the street was that we’d have a good day on Monday after oil, copper and iron ore prices went up over the weekend and US tax reform talk continues to excite Wall Street. And as long as the New York Stock Exchange and Nasdaq on Times Square are in buying mood, the world will follow.
However, this week will be a test for market positivity both here and abroad. Of course, the ultimate exam this latest leg up in this bull market rally will have to sit comes when President Trump’s key policies — especially his tax plans — go to the US Congress for approval.
If the Trump dreams become political horror movies, then a nightmare on Wall Street could end up showing at a stock market near you! I don’t want to think about this but I am obligated to share this analysis with you.
Like him or loathe him, President Trump, minus his excessive protection policy, has the plans that power stock markets higher and that’s why we’re dealing with such share price optimism right now. If he fails, we will all feel it, so we have to be on the Trump train!
Nothing this week could trigger a correction, but we’ll either sneak higher or encounter what seems to be an overdue pullback if the story ends up less optimistic than most of us think.
In the USA, the Fed could create a few issues when the Fed Chair Janet Yellen testifies before Senate and House committees on the economy and Fed policy.
Last year at this meeting, Janet talked and four rate rises became the expectation, but it ended up being one. This year, three rises are on the table, but this time it might be believed and it could spook those who have already pocketed a lot of profit.
Believe it or not but this year could be the year Donald makes up with Janet, as both probably want the same thing — a fast-growing USA, which then needs higher interest rates. It’s what normal, healthy economies have looked like.
The Yanks also get inflation and retail sales, which will help paint the future picture but the Fed and Yellen are the main attraction. That said, some big US companies report their profits and it would help if these revelations add to the prevailing positivity.
Also this week a number of Fed officials such as Richmond Fed President, Jeffrey Lacker, will speak on the US economy. These people can say too much and can’t be totally ignored. The Philly Fed survey also comes out and this is an important beacon for where the US economy might be heading.
At home and reporting season takes centre stage but we also get a lot of economic indicators. I’m keen to see the NAB business survey on Tuesday and the Westpac consumer sentiment number on Wednesday. Thursday brings the latest employment report and by week’s end we should have a rough idea about how we’re tracking.
I’m hoping the new and more feisty Prime Minister actually starts to buoy confidence but it might be too soon and he may need more Bill Shorten tongue lashings in Parliament before we believe our PM is in the driving seat.
And while all this will be interesting, it’s company reports I want to see. This is what’s in store for stocks junkies:
Newcrest, Ansell, Bendigo & Adelaide Bank, Aurizon, Amcor, JB Hi-Fi, Challenger, Cochlear, GPT Group, Treasury Wine Estates, A2 Milk, Boral, CSL, Commonwealth Bank, Computershare, Domino’s Pizza, Dexus Property, Inghams, Wesfarmers, Sonic Healthcare, Goodman Group, Mirvac, Origin Energy Telstra, Tatts Group, Star Entertainment, Sydney Airport, South32, Spark New Zealand, IPH Limited, Bapcor, Evolution Mining, Mineral Resources, ASX, Duet, Mantra, Link and Abacus.
The best news of last week was the optimism of the Reserve Bank Governor that we’re going to grow around 3% per annum, which is more optimistic than the average of 27 economists in a Fairfax survey, which came in at 2.4%. I’m backing Dr Phil Lowe but I want to see some good economic and company news this week.
It’s early days for corporate reporting but it has been good news so far. Have a look at these charts from AMP’s Shane Oliver:
Source: AMP Capital
Only 20 companies have reported, “but so far so good, with 67% exceeding earnings expectations compared to a norm of 44%, 67% of companies seeing profits up from a year ago and a stronger than expected result from Rio Tinto confirming that the turnaround in resources sector profits is on track,” Shane observed.
This will be a busy week for yours truly but I look forward to seeing Shane’s chart at the end of the week and I really hope I can still tell a very positive story for Aussie profits. If I can and Donald doesn’t have a brain explosion, I’m certain we will see at least 6000 on the S&P/ASX 200 index this year and we should even go higher!
A pullback has to happen but if the good news — both economic and company profits — keeps rolling in, then 2017 should be great for bulls. I don’t want to think about the opposite but I will be watching for indicators that might tell a different story and I hope I don’t see them.
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