Blue Skies Come With Presidential Elections: Global Week Ahead

I start each week thinking globally. Do you? Follow me on Twitter @johnblank100.

In advance of this Global Week Ahead, stock trading started out cautiously.
The S&P 500 struck yet another record high last week. The U.S. earnings season calendar shows around 200 S&P 500 companies report results this week.

Mostly well-received S&P 500 earnings reports -- and the assumption of nearly free central bank money to the end of 2017 -- supported this record rise.

One month ago, a surprising June 23rd Brexit vote roiled stocks. Fed futures offered us a 15% chance of a 25 bps Fed Funds hike in December. That probability is now 45%. U.S. macro data -- mostly a strong +287K in June job adds -- have affirmed U.S. growth sentiment.

On Wednesday, don’t expect the FOMC to change its Fed Funds rate from the current 0.5%. Traders can get more forward-looking clues from their ‘dot-plot’ rate hike trajectory.

On Friday, however, expect the BoJ to cut Japan’s macro forecasts and ease monetary policy. 10-year U.S. Treasury bond yields touched a record low of 1.32% on July 6th. These U.S. bonds now trade around 1.57%. Equal maturity German Bunds trade at an incredible -0.03%. In turn, Japanese 10-year equivalent gov’t bonds trade even lower at -0.24%.

In a strategist’s mind, global markets have looked out to 2017 to locate bullish earnings cues — ever mindful of super-low rates on offer. This assisted a traditional U.S. summer stock rally.

This year, a traditional U.S. midsummer stock rally has been enhanced further. Blue skies are showing up in advance of a U.S. Presidential election held in early November.

The idea?

Neither the Fed, nor any other monetary authority, will rock the boat in front of a big U.S. election.

Off we go, on a big adventure to higher highs. This scares cautious people. But mostly, it will get still more stale institutional money off the sidelines. The end of the year comes quickly. Managers feel compelled to show their worth then.

With a +8.5% annual return rise typical for a Presidential election year, why miss out on that?

3 stocks to look into this week--

(1) Benchmark Electronics (NYSE:BHE) : This is a $1.1B market cap stock. The company is a top 10 electronics contract manufacturing services player based in California. The stock has a Zacks Rank #1 (STRONG BUY) rating and carries a Zacks long-term VGM score of A. Shares trade at $23.

(2) Ryerson Holding (NYSE:RYI) : This is a small $455 million small cap steel processor and distributor with about 100 locations in North America. The stock has a Zacks #1 Rank (STRONG BUY) rating and carries a Zacks VGM score of A, with A’s in value, growth and momentum. Shares trade at $14.

(3) Wex Inc. (NYSE:WEX) : This is a $3.7 billion market cap financial transaction services stock. The company is a global leader in corporate payment solutions. Fleet, Travel and Health Care are the 3 major market segments it serves. The stock holds a Zacks #1 Rank (STRONG BUY) rating and carries a Zacks VGM score of B. Note: This company reports BMO on July 27th this week. Shares trade at $95.

Here are key global/macro indicators out this week—

On Wednesday, big news will be made by the Fed’s FOMC announcement. On Friday, the BoJ in Japan will follow up with its own monetary policy announcement.

Keep an eye out for the Eurozone unemployment rate on Friday. That rate is supposed to fall to 10.0%. A fall to 9.9% would be a big positive surprise.

On Monday, Germany’s influential IFO indexes came out.

Germany’s Business Climate was 108.3, after a 108.7 prior report. This was well above expectations for 105 after Brexit.

Germany’s IFO Current Conditions went to 114.7 from a 114.5 prior report. This was also above a forecast for 113.5.

Germany’s IFO Expectations index was 102.2 from a 103.1 prior report. This was also above a forecast for 101.5.

Poland’s unemployment rate fell to 8.8% from 9.1%.

South Korea’s GDP growth should be +2.8% y/y. That ‘muddle through’ reading is what it has been, lately.

On Tuesday, the start of a 2-day US Fed FOMC meeting happens.

U.S. new home sales should get to 560K from 551K. The U.S. composite Case-Shiller home price index should rise +5.6% y/y from +5.44%.

Brazil’s COPOM monetary policy meeting happens.

Sweden’s y/y reading of its purchasing price index (PPI) should be 0% this month. The y/y reading looks for -4.5%. Deflation like that shows you the reason Sweden’s Riksbank is using negative interest rates now.

On Wednesday, the FOMC should stay at 0.5% on its Fed Funds rate.

US Durable Good orders (ex-transport) should be -2.6% y/y from a -2.2% y/y reading prior.

Mexico’s unemployment rate should be 4.05%.

Australia’s consumer price inflation (CPI) should be +1.2%, in line with a prior reading of +1.3%.

Sweden’s consumer confidence should fall to 96.2 from a prior 98.7. Though, like the German IFO indexes, there could be an upside surprise again. Sweden’s manufacturing confidence should be down to 103.5 from 104.8. Again, an upside surprise could be in the cards, post-Brexit.

On Thursday, the Bank of Japan (BoJ) starts a 2-day monetary policy meeting.

Minutes from Brazil’s COPOM monetary policy meeting are released.

Germany’s unemployment rate should be unchanged at 6.1%.

US initial claims look really low at 265K.

On Friday, stress tests for Europe’s banks will be released.

The BoJ should keep it overnight rate at -0.1%. There will be a Kuroda press conference and a BoJ policy statement.

???GDP in Europe may fall a bit to +1.5% from +1.7% y/y in the latest 1st estimate reading. For comparison, GDP in France may get to +1.3% y/y in a preliminary reading.

The Eurozone unemployment rate may fall to 10% from 10.1% prior.

The Central Bank of Russia (CBR) announces its latest interest rate.