S&P 500; US Indexes Fundamental Forecast – January 17, 2017

U.S. equity indexes finished mixed on Monday in light trading. Volume and volatility were below average because of a U.S. bank holiday. Global equity markets also drifted lower as investors awaited more detail on the U.K.’s Brexit plan and the inauguration of President-elect Donald Trump later this week.

In the cash market, the blue chip Dow Jones Industrial Average finished at 19885.73, down 5.27 or -0.03%. The benchmark S&P 500 Index closed at 2274.64, up 4.20 or +0.18% and the NASDAQ Composite ended the session at 5574.12, up 26.63 or +0.48%.

Forecast

Investors are likely to take a cautious approach on Tuesday because of geopolitical events surrounding a speech from U.K. Prime Minister Theresa May and Trump’s inauguration on Friday.

In a speech, May is expected to outline plans for a “hard Brexit”. Over the weekend, the U.K.’s finance minister Phillip Hammond told a German newspaper that if Britain doesn’t keep its access to the EU’s single market, London would pursue a new “economic model.”

May is expected to outline her 12 priorities for the upcoming negotiations with the EU. . She is expected to say Britain will not seek a Brexit deal that leaves it “half in, half out” of the European Union.

Traders will also get the opportunity to react to earnings reports from Morgan Stanley, United Health, Comerica and Interactive Brokers.

The key economic report is Empire State Manufacturing. New York Fed President William Dudley and San Francisco Fed President John Williams are scheduled to give speeches.

Although Brexit worries are expected to weigh on the markets early in the week, conditions could change on Friday with Trump’s inauguration. His inauguration speech is expected to bolster the markets especially if he talks about his plans to make America great. Many investors expect the headwinds from last week’s failed news conference to dissipate.

Investors still feel there is risk that his promises may take longer than expected or they won’t happen at all. But mostly there are concerns over just how and when they will occur. The key issues are tax cuts, relaxed regulations and fiscal spending. However, concerns are also being raised over his new healthcare plan, tariffs and trade deals.