At the beginning of the week, while European stock markets were in the red, the broad American indices moved upwards, thanks to a rotation from tech stocks to more traditional sectors like energy, materials, and healthcare. This shift was highlighted in a recent macro analysis by SEB’s macroeconomist and US expert, Elisabet Kopelman, which also touched on developments in Asia.
In Asia, Tokyo Stock Exchange declined on Monday following news that the country’s central bank would discuss a potential interest rate hike. Meanwhile, both China and Hong Kong saw gains, likely driven by reports suggesting that President Donald Trump’s proposed tariff levels could be implemented gradually. According to Bloomberg, Trump’s team is considering incremental tariff hikes under emergency powers, potentially raising US import duties on goods by around 2 to 5% per month. This approach would provide Trump with more flexibility to use tariffs as a negotiating tactic in trade policy, while also limiting potential price increases.
SEB noted that the market will continue to focus on Trump and his actions following his inauguration as president next week. Until then, it is important to keep an eye on the Senate hearings for Trump’s new administration, which are set to begin today and run through the end of the week.
One of the more controversial figures highlighted by SEB is Pete Hegseth, Trump’s nominee for Secretary of Defense. Hegseth, who faces allegations of misconduct and a lack of leadership skills, will undergo questioning on Tuesday. On Wednesday, attention will turn to Marco Rubio, Trump’s nominee for Secretary of State and a vocal advocate for tough measures against China.
While most administration appointees are expected to receive approval from the Republican majority, SEB suggests that the hearings could offer insights into future policy changes. Additionally, SEB advises monitoring the US Consumer Price Index (CPI) set to be released on Wednesday, which is expected to show a return to a more typical monthly rate with a core CPI of 0.2% after four months at 0.3%.
SEB also hints at a potential revision of its forecast regarding the Federal Reserve’s interest rate cuts, currently set at four for the year. The Fed has already begun factoring in Trump’s policies into its projections, leading SEB to believe that one or two rate cuts may be postponed until the following year. This shift underscores the evolving landscape of economic policies under the new administration, with implications for global markets and investors.