Take Five: Mr. Trump, we've been anticipating you.

 

(Updates paragraph 16 of Friday's story to reflect the start of the fourth year of the war in Ukraine.)


(Reuters)The potential impact of Donald Trump's return to the White House on markets, international relations, and global trade is about to be revealed to investors around the world.

As the fourth-quarter earnings season begins in earnest, Trump's inauguration as the 47th president of the United States on January 20 is expected to bring with it a Day One-barrage of executive orders on everything from tariffs to taxes.


Here are some predictions for the markets in the upcoming week from Lewis (JO:LEWJ) Krauskopf in New York, Alun John, Karin Strohecker, and Amanda Cooper in London, and Rae Wee in Singapore.

1. GREETINGS, MR. TRUMP

The start of Trump's second term as president of the United States on Monday is anticipated by investors worldwide.

Some believe he may start signing executive orders immediately after his inauguration, even before the ceremonial parade, as he has promised to do on his first day in office.

Investors might not be able to completely respond until Tuesday because U.S. markets are closed on Monday in observance of Martin Luther King Jr.

Following the leaks, counterleaks, and denials that have already agitated currencies and shares of major international manufacturers, any early tariff actions will be given special attention.

Ahead of Trump's inauguration, long-dated bond yields have increased as investors anticipate that his promised tariffs and tax cuts will spur domestic economy and cause inflation.

However, with the U.S. debt-to-GDP ratio approaching 100%, veteran officials are questioning if bond vigilantes are telling the truth.

2. QUARTERLY EXAMINATION

In the next week, investors who are banking on strong U.S. corporate profits in 2025 to lift stocks will get a more complete view of the scenario. A large portion of Corporate America will release its last quarter 2024 results and provide an outlook for the coming year. The following week will see the release of earnings from consumer goods manufacturer Procter & Gamble (NYSE:PG), credit card company American Express (NYSE:AXP), healthcare behemoth Johnson & Johnson (NYSE:JNJ), and streaming company Netflix (NASDAQ:NFLX). Profits at several of the largest U.S. lenders increased as deal-making accelerated and trade was supported by robust equities markets as major banks began the quarterly earnings season on January 15. According to LSEG IBES statistics as of January 15, S&P 500 businesses are anticipated to report fourth-quarter earnings that are 10.4% higher than those of the same period last year.



3. PEACE AND WAR (AND DAVOS)

Trump is anticipated to keep influencing the course of the conflicts in the Middle East and Ukraine.

Although details are still being worked out, Sunday is still the anticipated start date of the Israel-Hamas ceasefire to end the horrific 15-month-old Gaza battle. Stabilization hopes have boosted stocks and bonds in the area and have the potential to influence oil prices.

Markets are preparing for how this will change the area, but bringing peace to Ukraine—which is approaching its fourth year of war—might take longer than the "day one" fix Trump promised.

Trump will speak electronically to CEOs and leaders, including Israeli officials and Ukrainian President Volodymyr Zelenskiy, who will be meeting in Davos starting Monday. According to a pre-summit survey, the biggest risk for 2025 is war.Hold on.

4. ENERGY BOOST


Right now, European policymakers are receiving exactly what they don't want: rising energy prices and greater borrowing costs.

Concern over the effects of additional Western sanctions on Russian petroleum has driven a 10% increase in oil prices this month alone, while natural gas prices have skyrocketed in the heart of winter.

The euro has fallen to 14-month lows versus the dollar, just above the $1.0 threshold, which is more concerning for Europe.

The United States has emerged as Europe's largest supplier of liquefied natural gas (LNG) and a significant source of crude oil since Russia's invasion of Ukraine in February 2022, so the currency's decline is problematic on two fronts. These price rises are unlikely to be included in the euro zone's final inflation figures for December, which could lead to a nasty surprise later.

5. ARE THEY GOING TO DO IT?

The first policy meeting of the year is about to begin at the Bank of Japan (BOJ). Although a rate hike would be the solution to the yen's suffering versus a rising dollar, even if only momentarily, the currency is now hovering around six-month lows.

And since both Governor Kazuo Ueda and his colleague Ryozo Himino stated that the choice would be up for debate at the BOJ's policy meeting on January 23–24, it appears that central bank policymakers are preparing the markets for such a move.

The fact that U.S. President-elect Trump's inauguration is only a few days away is advantageous since it allows the BOJ time to consider the potential effects of his policies on financial markets.


In any case, traders have increased their bets for a January rate hike in response to BOJ officials' statements. A 25 basis point increase is currently 70% certain, according to futures.