Where to begin? This week is filled with events that have the potential to be market-moving, and investors will likely need to buckle their seatbelts as the trading week gets under way. A G7 meeting over the weekend, as well as a critical meeting between U.S. President Trump and North Korean Leader Kim Jong-Un to take place on Tuesday will likely dominate financial media headlines. As if that is not enough, both the U.S. Fed and the ECB will be meeting later in the week to make key policy announcements.
The G7 meeting comes at a time when geopolitical tensions are high. President Trump has already indicated a willingness to walk away from the group, and the issue of global trade is likely to become a major factor in global financial market stability. Mr. Trump has already expressed his displeasure with the state of trade negotiations, and is likely to leave the summit early. The issue of trade is a major source of tension, and tempers could flare further if no meaningful progress is made.
The meeting between President Trump and Kim Jong-Un is both historic and nerve-wracking. The ongoing nuclear ambitions of North Korea have been a major source of global geopolitical angst in recent months, and this meeting has the potential to put some key issues to bed. Both leaders, however, have shown a tendency to change their opinions quickly, and the possibility of anything lasting coming from the meeting is by no means a done deal. If the meeting is seen as being constructive, it could lead to increasing risk appetite and higher stocks. If the meeting is seen as being a “dud,” global markets may see increasing risk aversion and a sell-off in stocks.
The U.S. Fed is widely expected to raise interest rates again this week. Although another hike in rates comes as no surprise, investors will likely be very interested in the central bank’s commentary. The central bank has already stated that it is comfortable letting inflation run slightly above its 2% annual target, and its opinion on the state of the economy could provide clues to its plans going forward.
On Thursday, the ECB is also set to announce its plans regarding monetary policy. The ECB is expected to discuss an end to its bond-buying program, although such an announcement may come at a challenging time. Just as the central bank is looking to throttle back on its stimulus measures, fresh worries over the health of the EU and the euro are being fueled by recent developments in Italy.
Italy will be holding elections later in the year that have the potential to bring major changes to the nation. As one of the EU’s largest economies and its largest debtor, any major changes in the nation’s politics could have significant consequences for the region and its shared currency.
Investors will likely pay close attention to any fresh developments in the region, and if Italy were to eventually decide to leave the union, who knows what might be the next domino to fall.
Stocks have been able to maintain recent strength, but with numerous major economic and geopolitical issues now making waves, the bull market’s days could be numbered. Gold and other risk assets could potentially stay relatively range-bound until risk assets begin to falter.