Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.
Germany’s stunning loss to South Korea (2-0) gave Mexico a lifeline in what is turning out to be an astonishing World Cup tournament. Mexico will now move on to play Brazil on Monday with Brazil an overwhelming odds on favorite.
Much like the World Cup, markets have also been highly interesting with volatility coming back after taking a hiatus last year. Recent geopolitical events have caused investors to become hypersensitive to news regarding trade policy and its long-term implications.
Sunday, populist candidate Andrés Manuel López Obrador is widely expected to win the Mexican presidential election. Señor López Obrador has recently toned down his earlier rhetoric about rolling back structural reforms and has vowed to be fiscally responsible. What effect this election will have on our 3rd largest trading partner is something to keep a close eye on. If as expected the new Mexican president can engineer a majority in Congress, we would expect this election to be a positive for our neighbors to the south. Mexico, the U.S. and Canada began renegotiating NAFTA last August at the demand of President Donald Trump, who claims the deal drew factories south of the border, resulting in hundreds of thousands of lost American jobs. He’s promised to negotiate a better agreement or withdraw. U.S. proposals have been focused on increasing Mexican labor costs. The current Mexican minimum wage is just $4.70 per day. The current administration would like to provide incentives for auto manufacturers to move production back to America in an effort to strengthen the U.S. manufacturing segment of our economy.
Besides the presidential election in Mexico, key events to watch for the week are Motor Vehicle Sales, due Wednesday, which are expected to rise 2.1% year-over-year. Also of key importance, the Nonfarm Payrolls report will be released this Friday. With the unemployment rate at its lowest level since 1969 (3.8%), will we continue to see above trend payroll growth?
If the upcoming Round of 16, with its win-or-go-home format, is anything like the group stage wrapping up this week, we’re in for more World Cup excitement!
Data deck for July 2 – July 6:
|
Date |
Indicator |
Period |
|
July 2 |
Markit manufacturing PMI (final) |
June |
|
July 2 |
ISM manufacturing index |
June |
|
July 2 |
Construction spending |
May |
|
July 3 |
Motor vehicle sales |
June |
|
July 3 |
Factory orders |
May |
|
July 5 |
ADP employment |
June |
|
July 5 |
Weekly jobless claims |
6/23 |
|
July 5 |
Markit services PMI (final) |
June |
|
July 5 |
ISM nonmanufacturing index |
June |
|
July 5 |
FOMC minutes |
--- |
|
July 6 |
Nonfarm payrolls |
June |
|
July 6 |
Unemployment rate |
June |
|
July 6 |
Average hourly earnings |
June |
|
July 6 |
Foreign trade in goods, services |
May |