Stock market trading has been acutely sensitive to economic data in the post-Covid era, with the averages moving sharply on upside and downside surprises. That could be about to change as Donald Trump plans to assume the presidency, bringing with him a high level of uncertainty and making policy possibly more important than the much-watched macro economic data that dominates Wall Street activity. The first test if that holds true: Friday’s nonfarm payrolls report for November that Bank of America recommends market participants “tread carefully” when assessing due to noisy data. “The market has never been this reactive to macro data as it has post-COVID. Why? Likely a combination of high data volatility, extreme forecasting challenges, and the Fed’s ‘data-dependent’ posture,” Ohsung Kwon, BofA’s equity and quant strategist, said in a note Tuesday. “But will this change if tariffs and unplanned policy announcements become the key macro drivers of equity vol?” he added. Trump has indicated plans to push tariffs that would be more aggressive than those implemented during his first term. He has also noted that they will be more expansive. One example is using them to force Canada and Mexico to control immigrant influx to the U.S, rather than merely economic grounds. Looking at the options market, traders are pricing in about a 0.86 percentage point reaction in either direction to the payrolls data, which Kwon termed “moderate” and what would be the smallest since July. “We’re watching,” he said. Like the October report, BofA expects the payrolls release to be noisy because of impacts from storms in the Southeast and a Boeing strike. The firm sees an above-consensus 240,000 jobs created, with 100,000 built in from the reversal of the storm and strike impacts. The Dow Jones estimate is for 214,000 after October’s 12,000 . The numbers have been subject to severe revisions. “We suggest taking the first print with a pinch of salt and putting more faith in the first and second revision when more data has been collected,” BofA wrote. On the Fed, markets expect another rate cut when its meeting concludes Dec. 18. However, BofA said that if the consumer price index, which will be out before the meeting, indicates another sizeable monthly move up, “it could be difficult for the Fed to follow through” with the rate reduction.
Traders brace for Friday’s jobs report, but Trump’s next move may matter more