The Federal Reserve will be overshadowed on Wednesday.
In the middle of a week that will see 189 of the S&P 500’s members report earnings, the Fed will announce its latest monetary policy decision at 2:00 p.m. ET.
This statement will not be followed by a press conference with Fed Chair Janet Yellen, and the market expects no changes to the Fed’s policy of pegging benchmark interest rates between 1%-1.25%.
The biggest news related to the Fed this week came on Tuesday afternoon, when The Wall Street Journal published an interview with President Donald Trump, who said that former Goldman Sachs (GS) executive and the president’s chief economic advisor Gary Cohn is a top candidate to replace Yellen when her term ends next year.
Yellen, however, is still being considered by Trump, who Trump said has “done a good job.” Trump added that he would like to see interest rates stay low, and the Yellen has, “historically been a low-interest-rate person.”
As for earnings, Wednesday’s highlight will come after the market close when social media giant Facebook (FB) reports earnings. Shares of the company were up better than 40% year-to-date through Tuesday’s close, and results out of the FANG stocks — including Facebook, Amazon (AMZN), Netflix (NFLX), and Google parent company Alphabet (GOOGL) — have been pegged as bellwethers for market sentiment during this earnings season.
Consumer confidence remains high
One of the biggest post-election themes in the U.S. economy was the surge in consumer and business confidence that followed from Donald Trump’s surprising election win.
In recent months, some of this optimism has waned as quickly-instituted reforms on the tax code, healthcare, and infrastructure investment have not materialized.
But as the stock market has rallied, job growth has remained strong, and oil prices have remained low, the tailwinds for consumers feeling good about their situation have remained in place.
On Tuesday, The Conference Board released its July reading on consumer confidence, with the headline index registering a reading of 121.1, better than the 116 that was expected.
The headline index was bolstered by an increase in consumers’ assessment of current conditions, which remained at a 16-year high. In a note on Wednesday, Michael Pearce at Capital Economics said this reflected, “a combination of falling gasoline prices, the strength of the job market, and recent record highs in the stock market.”
Pearce added that with confidence remaining high, there is “good reason to think that the recent weakness of underlying retail sales will be temporary and that consumption growth will remain strong over the rest of the year.”
And in an economy that is as highly-levered to consumer spending as the U.S., strong consumption bodes well for overall economic growth.
In recent weeks, Trump has taken to Twitter to brag about the stock market hitting record highs. And while elevated stock prices do not directly reflect economic progress, success, or even project as much, they do bolster confidence among investors and, in turn, consumers.
So for a president that has so far struggled to get any major legislative wins, high stock prices and high confidence will have to serve as evidence that Trumponomics — MAGAnomics, as the administration has taken to calling is — will make America great again.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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