Stock market trading has been very sensitive to economic data in the post-Covid era, with averages moving significantly on unexpected ups and downs. That could be about to change with Donald Trump’s bid to take over the presidency, bringing with it a high degree of uncertainty and making politics perhaps more important than the macroeconomic data dominating Wall Street activity. The first test of whether that’s true: Friday’s farm payrolls report for November prompted Bank of America to advise market participants to “exercise caution” when evaluating noisy data. “The market has never been as reactive to macro data as it has been post-Covid. Why? Likely a combination of high data volatility, extreme forecasting challenges and the Fed’s ‘data driven’ stance,” Ohsung Kwon, BofA equities and quant. strategist, he said in a statement on Tuesday. “But will this change if tariffs and unplanned policy announcements become the dominant macro driver of equity volume?” he added. Trump has indicated his intention to push tariffs that will be more aggressive than those imposed during his first term. He also stated that they will be wider. An example is being used to force Canada and Mexico to control the entry of immigrants into the US for economic rather than economic reasons. Looking at the options market, traders are reacting 0.86 percentage points in either direction to the payrolls data, which Kwon called “moderate” and would be the smallest since July. “We’re watching,” he said. Like the October report, BofA expects the payroll release to be noisy, affected by storms in the Southeast and a strike at Boeing. The company sees 240,000 jobs created above consensus, including 100,000 after the storm and strike impacts. The Dow Jones estimate is 214,000 from 12,000 in October. The numbers have undergone severe revisions. “We recommend taking the first print with a grain of salt and putting more faith in the first and second review when more data is gathered,” BofA wrote. At the Fed, markets expect another rate cut when its meeting ends on December 18. However, BofA said that if the consumer price index due out before the meeting shows another big monthly increase, “it could be difficult.” To keep feeding” with reduced rates.
