It’s set to be another nail-biting week for investors as U.S. voters go to the polls in a too close to call presidential election race that will have far-reaching consequences for fiscal policy and global trade. Meanwhile, the Federal Reserve is expected to deliver another rate cut at its latest policy meeting with investors on the lookout for clues on the future path of interest rates. Here’s your look at what’s happening in markets for the week ahead.
- U.S election
Election day is on Tuesday with early voting already well underway in a tight race for the White House, pitching Republican Donald Trump against Democrat Kamala Harris.
Recent gains in Treasury yields and the dollar are seen by some analysts as the market anticipating a win for Trump. But polls suggest a very close race, meaning that a victory by the Democrat could spark a rash of trading unwinds.
Traders may just be rooting for a clear result, fearing a potentially contested election and lengthy period of uncertainty about the outcome as a significant risk to markets.
Only seven states are seen as truly competitive, but a poll released on Saturday showed Harris holding a surprise lead in Iowa, a state Trump won easily in the last two elections, though another poll showed her trailing in that state.
- Fed meeting
The Fed is widely expected to deliver a 25-basis point rate cut at the conclusion of its latest policy meeting on Thursday, followed by another in December, after September’s 50-bps reduction.
Friday’s nonfarm payrolls report, which showed that jobs growth almost stalled in October amid the impact of strikes and weather disruptions, cemented expectations for a smaller rate cut. Jobs growth for the prior two months was revised lower, indicating that the labor market is gradually cooling.
Investors will be hoping the Fed’s statement and comments by Fed Chair Jerome Powell at the post policy meeting press conference will show whether officials believe economic resilience will continue – and if they might cut rates more slowly as a result.
But analysts at Morgan Stanley said in a note Friday that they don’t expect Powell “to commit to the size or cadence of future cuts but to reiterate that the Fed remains data dependent.”
- Earnings season
Third quarter earnings season continues, with a slew of results due in the coming days, even though investors will likely be focusing their attention on the election and the Fed.
Palantir (NYSE: PLTR) and Constellation Energy (NASDAQ: CEG) are both due to report on Monday, followed a day later by Builders FirstSource Inc (NYSE: BLDR), Ferrari (NYSE: RACE) and Super Micro Computer (NASDAQ: SMCI). Shares in SMCI lost almost 45% last week after a regulatory filing revealed that Ernst & Young resigned as the company’s accountant.
Qualcomm (NASDAQ: QCOM), CVS (NYSE: CVS) and Arm Holdings (NASDAQ: ARM) are due to report on Wednesday, with investors on the lookout for any update from Arm on its lawsuit against Qualcomm.
Pinterest (NYSE: PINS), DraftKings (NASDAQ:DKNG), Cloudflare (NYSE:NET) and Affirm (NASDAQ: AFRM) are among some of the names due to report on Thursday.
- Bank of England rate cut
The Bank of England meets on Thursday and is widely expected to lower rates by 25 bps, after cutting rates for the first time in more than four years in August. The policy decision could draw extra attention, coming on the heels of the Labour government’s new budget.
Investors are now anticipating fewer BoE interest rate cuts next year as plans for higher borrowing and spending unveiled in last Wednesday’s budget saw UK borrowing costs rise to their highest levels in a year.
Elsewhere, the Reserve Bank of Australia is expected to keep its key interest rate unchanged on Tuesday and for the rest of this year, as strong economic activity and sticky core inflation still warrant a cautious approach.
- Oil prices
Oil prices look set to remain volatile as geopolitical risk premium offsets concerns over rising supply and a weaker demand outlook.
Oil prices rose on Friday amid reports that Iran is preparing a retaliatory strike on Israel to be launched from Iraq within days. Iran and Israel have engaged in a series of tit-for-tat strikes within the broader Middle East warfare set off by fighting in Gaza.
Prices were also supported by expectations OPEC+ could delay December’s planned increase to oil production by a month or more on concern over soft oil demand and rising supply. A decision could be made as early as this week.
For the week, Brent posted a decline of about 4%, while U.S. crude futures were down about 3% as record U.S. output weighed.
