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S&P 500; US Indexes Fundamental Forecast – January 20, 2017

By:
James Hyerczyk
Updated: Jan 20, 2017, 08:51 UTC

The three major U.S. equity indexes closed lower on Thursday in a lackluster trade as investors prepared for Friday’s inauguration of Donald Trump as

Stocks SP 500

The three major U.S. equity indexes closed lower on Thursday in a lackluster trade as investors prepared for Friday’s inauguration of Donald Trump as President of the United States. There is a lot of uncertainty leading up to the inauguration. We also have volatility in the Forex markets and especially in the dollar that may eventually spill over into the stock market.

In the cash market, the benchmark S&P 500 closed at 2263.69, down 8.20 or -0.36%. The blue chip Dow Jones Industrial Average finished at 19732.40, down 72.32 or -0.37% and the tech-based NASDAQ Composite ended the session at 5543.18, down 12.47 or -0.23%.

The major stock indexes rallied to new all-time highs following Trump’s unexpected victory in November, on the back of expectations for aggressive fiscal spending, lower corporate taxes and the relaxing of regulations in a few sectors.

However, since that initial rally, starting around Christmas, the rally started to pause mostly because of political uncertainty. This has taken its toll somewhat on the Dow, for example, encouraging profit-taking for almost a month after buying dried up as the market approached the historical and psychological 20,000 level.

It appears the foundation has been laid for the rally to continue, but investors are waiting for the straight story from Trump about how he intends to grow the economy. Not necessarily to generate windfall profits, but perhaps even a story so that investors can manage the risks ahead.

In U.S. economic news, housing starts jumped 11.3e percent in December, coming in ahead of the estimates. The Philly Fed Manufacturing Index rose to 23.6, above the consensus estimate of 15.8. Weekly Jobless Claims dropped 15,000 to 234,000, bringing it close to its lowest level in 40 years.

Daily S&P 500 Index
Daily March E-mini S&P 500 Index

Forecast

There are no major economic reports on Friday, but Donald Trump is scheduled to deliver his inauguration speech at around 1715 GMT. The speech is expected to be short if Trump follows protocol, however, with Trump, investors should be prepared for volatility.

Also, if he follows tradition, he’ll avoid specific talk about the economy, nor will he speak about his economic policies plans. He should, however, try to act Presidential by trying to unify a divided country. Something that became obvious after the election votes were tallied and showed he lost the popular vote.

So don’t expect much market movement today unless investors decide to take matters into their own hands and interpret his speech as bullish or bearish. Furthermore, investors usually give a new President a 100 day honeymoon period to get his matters in order.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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