Heading into last week, it still looked like it might come right down to the wire. The world waited on pins and needles to hear who would prevail, Donald Trump or...Jerome Powell?

You see, politics aren’t really my thing. And even if they were, I wouldn’t be brave enough (or cocky enough) to try and air my views in front of a captive audience like this one (besides, that would be a fast track to the unemployment line in a job market that – as you’ve read here before – isn’t exactly as robust as it once was, especially for economists with few marketable skills other than a peculiar knack for cracking wise about markets.) No, if you’re hoping to find commentary of a political sort about last week’s goings-on, you’ll have to keep shopping because you won’t find it here.

Still, I’d imagine that roughly half of the people reading this woke up on Wednesday morning ecstatic with Tuesday night’s result while the other half woke up despondent. And that’s okay: A big part of what makes living in America so great is the ability to disagree with each other – vehemently, even – and still get on with business when the dust settles. So, if you were on Team Trump, congratulations on the win; If you were on Team Harris-Walz, it’s probably time to bandage your wounds and get back to business.

That’s definitely what markets did last week. U.S. equities had one of their best days so far this year on Wednesday as election results rolled in. And if you’re willing to look past a big post-election night spike in longer-term U.S. Treasury yields, traders didn’t even seem all that put off by the idea of single-party control of the White House and both houses of Congress – a political trifecta that cliché dictates markets usually don’t like because it implies two years of aggressive, agenda-driven change. Maybe that’s because the Trump agenda aspires to a few things that markets like a lot, like lower corporate tax rates and less stringent regulation. Or maybe it was simply a relief that we got through election night without tanks in the streets or any other terrible, destabilizing headlines.

But back to those pins-and-needles. No matter who prevailed on Tuesday night, there was always going to be another showdown – one where votes are counted in dollars and cents rather than bubbled-in ballots. Turns out this one was between Trump’s apparent ability to Make Markets Great Again on one hand and Jerome Powell’s ability to put a floor under risky assets by cutting interest rates on the other. Again, Trump won in a landslide – his impact on the market was much bigger than Powell’s.

It’s not that there was anything necessarily wrong with Thursday’s post-Fed decision market action, (in fact, Thursday was the day that treasury yields came back off the boil) it’s just that Wednesday’s post-election rally was so much better. And for those of us who have fallen into the habit of listening to Powell’s post-decision press conferences with a tick-by-tick view of the market’s reaction open on the screen beside it, Thursday’s call was about as sedate as it gets. So, in a head-to-head contest of who was able to inflate markets more – Trump with his Tuesday night election victory, or Powell with his Thursday afternoon quarter-point rate cut – Trump once again did the Trumpi-est thing that Trump does and upstaged his closest competitor when the spotlights came on.

But as nice as Wednesday morning’s Trump Bump was, I’d still caution against putting too much faith in any kind of sustained market move catalyzed solely by last week’s vote. We’ve looked hard for evidence that election-day optimism (or pessimism) persists beyond just a day or two and have been unable to find much, except when extenuating circumstances prevail. I suspect one of the key reasons for that is that promising to enact market-favorable policies during the campaign is a very different thing than actually implementing them, even when a president holds a thin majority in both houses of Congress. Moreover, markets tend to have the attention span of a swing-state voter force-fed gobs of PAC-financed campaign ads, which means investors are probably in the process of moving on to something else to obsess over even as I write this.

I guess what I’m saying is that last week’s post-election (and post-Federal Open Market Committee (FOMC) bump was nice for anyone who maintained exposure throughout the campaign, but I wouldn’t count on it to continue under its own momentum alone. Besides, a rematch of Trump vs. Powell that could have much broader significance for markets and the economy is already in the works: Trump once vowed to remove Powell – whom he nominated – as Chairman of the Federal Reserve (Fed) during a second Trump administration. There’s plenty of uncertainty surrounding whether or how that might work from a legal perspective, but when asked explicitly if he would go quietly into the night under such a scenario, Powell responded with a flat “no.” That sets up a potential cage match that I’d happily pay $100 to watch on pay-per-view – especially if MMA aficionado Joe Rogan commentates the blow-by-blow.

As promised, there wasn’t much else to get too excited about on last week’s calendar. The University of Michigan’s read on consumer sentiment once again surprised to the upside, driven entirely by a more positive outlook about the future (notably, the survey period ended on Monday before election day.)¹ Meanwhile, the manufacturing sector continues to contract, a point underscored by disappointing factory and durable goods orders releases on Monday (which also featured a big downward revision for August’s previously released numbers).² But below the headline was evidence that a big drop in demand for civilian aircraft was responsible for much of the weakness, making it possible to argue that Monday’s data was at least influenced by a work stoppage at Boeing. For what it’s worth, the strike was officially resolved last week when the union rank-and-file agreed to management’s latest offer. That could return as many as 33,000 workers to manufacturing payrolls next month and might even put would-be airplane buyers back in a spending mood.

The good news is that for the time being, any weakness in manufacturing is still being offset by strength in demand for services. While entirely expected, it’s still comforting to see ISM and PMI data again come in on the strong side for the services sector.^3,4 Notable snippets included inflation data that wasn’t quite as tame as economists might have liked inside one survey, and employment figures that were perhaps a little weaker than most would prefer in the other. Again, look for trends in manufacturing and services to align before passing too firm a judgement on the economy’s direction from here.

For those in tune with what’s happening overseas, last week authorities in China approved a massive $1.4 trillion debt swap that effectively takes some of the burden of debt amassed by local governments and makes it the central government’s problem. While this was an eye-catching amount of stimulus, it was nonetheless viewed by some as a case of Beijing keeping much of its powder dry in anticipation of a trade war with Trump’s next administration. Said differently, last week represented a shot in the arm for China’s economy, but a much bigger shot is still waiting to be fired.

Finally, it was a great week to be Nvidia. (Okay, another great week to be Nvidia...) Why? Not only did the chipmaker pass Apple as the world’s biggest company by market cap, Nvidia also replaced Intel – who was once to the PC world what Nvidia is today to the AI ecosphere – in the Dow Jones Industrial average. Times, they are a changin’.

What to watch this week

After last week’s election and Fed-sponsored cut in interest rates, we deserve a break. Not gonna’ get it: This week’s calendar includes a few high-profile earnings results, a post-decision resumption of Fed speeches, retail sales for October, another read on regional manufacturing trends and inflation at both the consumer and producer levels.

We’ve argued here that inflation matters less to markets than it has in the recent past, and that will probably remain true as long as it stays at least reasonably quiet. The Bureau of Labor Statistics will release the Consumer Price Index (CPI) on Wednesday and Producer Price Index (PPI) on Thursday. There’s little reason to expect a big, market-moving surprise in either release, but it is notable that complaints about higher input prices haven’t yet disappeared entirely from key surveys like those from the Institute for Supply Management and the Purchasing Managers Indices. Meanwhile the Fed’s official statement solidifying last week’s 0.25% rate cut changed its description of the Committee’s view of inflation ever-so-slightly from “we have greater confidence that inflation is moving sustainably toward our 2% target” to “progress has been made.”⁵ Hmm. To my ear that sounds like a small note of frustration might have crept into the Fed’s tone, which is enough reason all by itself to continue to pay at least passing attention to this week’s inflation releases. 

We’ll have multiple chances to test that frustration theory all week, as Fed speakers hit open mic nights across the country. Fed officials ordinarily respect a “blackout period” surrounding Fed rate decisions during which they’re reluctant to step on stage, but with Thursday’s decision behind us, that’s no longer the case. While various Fed speakers are planning events all week (please tip your servers...), the highlight will be when Jerome Powell himself stops in Dallas on Thursday to talk economy with the good people of the Lone Star State. Watch for any hints about his or the Committee’s views on inflation, the labor market or – new this season – Fed independence.

From an earnings perspective, Home Depot’s quarterly results on Tuesday are worth a look given that company’s leverage to the economic cycle generally (and the housing market specifically.) Other highlights include Cisco Systems on Wednesday (screen for AI read-through), Disney on Thursday (travel and consumer demand) and Ali Baba on Friday. With the Chinese economy in tighter focus than ever before, Chinese tech and consumer giant BABA’s results could be enlightening. Watch for any signs that BABA, like its central government, is girding for (trade) war.

Other miscellaneous releases include the National Federation of Independent Business’ survey of small business sentiment (Tuesday) and October retail sales on Friday. As the holiday season approaches, Friday’s retail sales results could be the more interesting of the pair. The U.S. consumer has remained perfectly willing to spend despite election- and economy-related uncertainty, and Friday’s release will confirm whether that remains the case.

Finally, one report that rarely gets the respect it deserves is the Fed’s Senior Loan Officers’ Opinion Survey (SLOOS), due out Tuesday. This quarterly survey of bank officials is ordinarily as interesting as, well, a quarterly survey of bank officials. But when the economy is teetering between expansion and contraction – especially when said teetering is the result of prior Fed actions designed to cool the economy and inflation by making it less attractive to borrow money – it can be downright scintillating. For several quarters running, this so-called SLOOS has painted a picture of bank lending standards that are recession-tight and loan demand that is more consistent with a cooling economy than a booming one. That seems to be changing slowly, and this quarter’s SLOOS will be the first to bake in at least a credible assumption of Fed easing and the lower rates that should eventually follow. That makes it interesting as a way to guess at what might be coming down the pike: If banks are getting more comfortable lending (and bank customers are getting more comfortable borrowing,) then it would be easier to make the case for growth. If the inverse is true (and the SLOOS lurches back in the other direction despite the expectation of continued Fed easing,) then the opposite is probably true. So, if you’re truly interested in all this macro stuff, give Tuesday’s SLOOS a read. At a minimum, it will test your stamina and commitment...