This week may be the most important week of 2017. It's expected that President Trump will nominate the next Chair of the Federal Reserve (Fed), our nation’s central bank, on Thursday, November 2nd.
If he does not re-nominate current Chair Janet Yellen, the new Chair will take over in February 2018. While Yellen is still in the running, most people believe he will select either current Fed Governor Jerome Powell or Stanford University economist John Taylor.
Whomever the president picks will help shape the path that short-term interest rates take over the next four years. Powell is thought by many to be more likely to keep raising interest rate hikes slowly. But even if Taylor is selected, today's low inflation will probably keep him from raising rates too quickly.
In addition to this selection, the Fed is meeting on Wednesday, November 1st. They will likely not raise rates this week, but they will make it clear they plan on hiking at their December 13th meeting.
Also on Wednesday, President Trump’s tax reform proposal is expected to be announced. While this would be helpful for corporate profits, over the weekend, opposition came to the forefront from the powerful National Association of Home Builders (NAHB). The NAHB says it cannot support the repeal of deductions for mortgage interest and property taxes. This suggests the path to tax reform may be a bumpy one.
This is also a very busy data week with the release of closely watched reports on manufacturing, services, income, and jobs. The jobs report will come out on Friday, November 3rd, and economists expect the economy added 312,000 new jobs in October. However, this is simply a ‘recovery number’ from the hurricane-induced September job slump where there was a loss of 33,000 new jobs.
Last week provided continued evidence that the U.S. economy and corporations are on sound footing. The economy has now posted back-to-back quarters of growth at or above 3%. Meanwhile, large corporations continue to post solid profits.
About 78% of companies have reported better-than-expected earnings, and these large companies have seen their earnings grow approximately 8% compared to a year ago.
The Simply Money Point
Even though there will be a flood of very important economic news and data this week, the big picture has not changed: the U.S. economy and corporate profits are growing. Profits will likely keep growing until the economy slows, and that is not likely to happen in the near term since recession risk is low. The economy continues to grow which is good news for you and your investment mix.