Sunday, November 4, 2012

The Week Ahead: U.S. elections and global trade

Tuesday's presidential election overshadows the week, and it is in a way the greatest leading economic indicator of all. The vote will determine the economic policies of the next four years that will, in turn, have an impact on the economy and all of the other indicators.

However, I don't for a second believe in a simple partisan interpretation of the results, as some employers across the country have been doing in letters to their workforce implying that an Obama win will result in layoffs and economic stagnation.

The economy is bigger than the president, bigger than the government, indeed bigger than the country. It is a balance struck among an uncountable number of public and private interests and decisions, not to mention the impact of such random events as earthquakes, hurricanes and rogue computers causing flash crashes.

The Associated Press' Nancy Benac has put together a fine hour-by-hour guide to election night. You can find it on Yahoo! here. The first statewide poll closings are at 7 p.m. Eastern.

There is but one major indicator out this week: The international balance of trade will be released at 8:30 a.m. on Thursday. It is usually interpreted in the lens of exports good, imports bad, China dangerous. Although in fact, whether it be imports or exports involving China or not, someone in the United States is profiting; otherwise, they would be making the trade.

Leading indicators out this week (in order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, out Thursday at 4:30 p.m. from the Federal Reserve.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims will be reported at 8:30 a.m. Thursday.

The index of consumer expectations in the University of Michigan/Reuters consumer sentiment report will be released Friday at 9:55 p.m.

I also like to keep an eye on the Baltic dry index of world shipping, updated daily.

Other reports of interest:

Monday: The Institute of Supply Management's non-manufacturing index, at 10 a.m.

Wednesday: Petroleum inventories at 10:30 a.m. Wednesday.

Friday: Import and export prices at 8:30 a.m.

Trading calendar

By my rules, as of Monday I can trade December vertical spreads and February single options and straddles. Of course, shares are good at any time.

Don't forget to vote Tuesday if you live in the U.S., and good trading!

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