The week ahead promises plenty of news for investors. It'll be the first workweek for President Donald Trump and his administration. The heart of fourth-quarter corporate earnings season will begin. And the preliminary data on the 2016 American economy will be released.
The earnings reports and economic statistics very well may reflect a decent-if-not-strengthening environment for investors. In the halls of the Federal Reserve, though, the outlook is not so rosy.
First, earnings: Dozens of companies in the Standard & Poor's 500 index, including McDonald's, Johnson & Johnson, Boeing, and Ford, are due to report their latest quarterly results. Among the group, profits could jump by an average of 6 percent, said John Butters, a senior analyst at FactSet, a financial research firm. Right now, the estimated growth rate is half that, but actual earnings often are better than predicted profits, meaning doubling the anticipated increase isn't out of the question, he said.
Second, the economy: During the third quarter, the American economy was growing faster than it had in two years. Preliminary fourth-quarter data will be released on Friday. While the growth in business profits described by Butters is helpful, it's expected the economy, while still growing, grew at a slightly slower rate during the period. The third-quarter growth spurt was helped out by China buying billions of dollars of U.S. soybeans. That didn't last into the final three months of the year, likely leaving the economy growing much slower than the 3 to 4 percent annual increase the Trump administration has pledged to achieve.
These higher expectations can be credited with helping fuel the stock rally in recent months. But the watchkeepers over the American economy aren't as encouraging. According to minutes from the Federal Reserve's December interest rate meeting, staff economists worried that risks to economic growth "were seen tilted to the downside." Among the worries cited were "considerable uncertainty" about future government spending, tax and other economic policies, which could _ depending how they turn out _ ignite faster economic growth.
