Investors are also awaiting the traditional World Economic Forum in Davos, Switzerland
The market’s expectations regarding President-elect Donald Trump’s first behaviors and measures begin to dissipate next Monday (Jan. 20, 2025), when the Republican takes over the White House for his second term. Trump promises to implement measures soon after the inauguration ceremony, and decisions on tariffs are among them.
It remains to be seen whether the tariffs are just a rhetorical instrument to pressure other countries, regardless of ally or adversary, to achieve other American economic and geopolitical objectives. Or whether they will actually be an instrument for the return of industrial production to the US currently found in other countries, mostly in Asia.
Tariffs will be used simultaneously for both objectives, but one of them will prevail and dominate market understanding. There will be more risk appetite in the markets and a tendency for a weaker dollar next week if the tariffs are seen as “fracas” and linked to achieving other economic and geopolitical objectives, or risk aversion and the continuation of the dollar’s upward trend if it is to strengthen the American domestic economy.
The tariff is not the only dish on this menu of Trump’s main first measures in office. Immigration, taxation and regulatory issues will be on investors’ radar to understand the direction of the price of assets linked to future interest rates – and the pricing of the Fed’s interest rate decision (Federal Reserve, the US central bank).
Those who will also be keeping an eye on what happens in the USA on Monday are the directors of the BoJ (Bank of Japan), who will define the country’s new interest rate next Friday (Jan 24). The market expectation is that the BoJ will increase rates by 25 basis points, raising interest rates from 0.25% to 0.5% per year.
BoJ authorities did not give this indication, pointing out that a rise in interest rates could occur at the March meeting. The only consensus among BoJ leaders is that the Japanese economy’s interest rate is low and should rise in the short term. In the opinion of economists, the interest rate hike is assured if Trump’s measures do not shake world markets, but should be postponed if there is turbulence in global stock markets over the next week.
In a week also busy with the World Economic Forum, which takes place annually in Davos (Switzerland), the global and national economic calendars are empty. The global highlights throughout the week are the interest rate decision by the Central Bank of China on Sunday (Jan 26) and the previews of PMIs (Purchasing Managers’ Indexes) for January in Japan, the United Kingdom , Germany, France, Eurozone and USA.
In Brazil, the highlights are the federal revenue for December and 2024 on Thursday and the January inflation preview (IPCA-15) for January on Friday (24.Jan).
In the earnings season on Wall Street, the highlight is Netflix’s fourth quarter 2024 results on Tuesday (Jan. 21).
