Despite the holiday-shortened week, there is a deluge of economic data this week. Specifically, Wall Street will be paying very close attention to the May jobs report released on Friday, June 1.
Economists expect that the economy added 190,000 jobs in May and that the unemployment rate remained at 3.9%. There are also important economic releases on inflation, manufacturing, personal spending, and personal income.
Additionally, we will get the second estimate of the first quarter GDP (Gross Domestic Product), which is basically our country’s ‘report card’ for the first three months of 2018. This is forecasted to be unchanged at 2.3%.
All of this data is critical when it comes to how quickly the Federal Reserve (Fed), our nation’s central bank, will raise short-term interest rates this year. Currently, there is an 80% chance of no more than two short-term rate hikes in 2018.
One reason the Fed is expected to raise rates at a measured pace is that, according to the minutes from the latest Fed meeting, they believe a temporary period of inflation slightly above 2% would be acceptable. In other words, the Fed is not that worried about inflation. There have been some inflationary pressures with rising oil and gasoline prices; however, those prices have pulled back with Saudi Arabia and Russia saying they may increase production later this year.
Last week, President Trump canceled the highly-anticipated North Korean Summit because of North Korea's recent "open hostility." Apparently, North Korea's response pleased Trump because steps are now being made for the two countries to meet.
In other international news, President Trump is not happy with the progress regarding Chinese trade talks, so the administration announced tariffs (taxes) on $50 billion worth of goods. This is now set to be imposed shortly after June 15.
President Trump is also looking at 25% tariffs on imported vehicles. This is likely a way to pressure Canada and Mexico on NAFTA (North American Free Trade Agreement) talks, as they are the top two countries for U.S. auto imports.
Lastly, President Trump signed a bill into law that rolled back banking regulations established following the financial crisis. Most of this deregulation helps community banks and smaller regional banks by reducing their compliance costs.
The Simply Money Point
There are a lot of moving pieces when it comes to the relations of the U.S. and the rest of the world. Most of this is negotiating tactics and shouldn't have a long-term impact on the investment markets.
The bigger picture is that inflation is low, interest rates are still low, the economy and earnings are growing, and there is little risk for recession in the next nine months, which is good news for the stock portion of your investment mix.