Trump’s Congress speech and four other things to look out for in economics this week

The market reaction to the address matters a lot, because the past couple of weeks have seen one of the longest bull runs for US equities that they have ever had

The President is due to outline his tax plans to Congress this week (AP)

It is not called the State of the Union address, the speech of the president to Congress that usually takes place in January, because it is a new president and Donald Trump wasn’t in the post then. But his speech to Congress on Tuesday is massively important because people are confused about their new leader and will be looking for some guidance as to what he really will do as his administration settles down. The key thing to look for will be any information about proposed tax changes.

Remember that any tax changes will be a negotiation between the President, his advisers (in particular Treasury Secretary Steven Mnuchin) and the Republican leadership in Congress. So don’t expect detail. But a timeline would be very helpful, for everyone who needs, or at least wants, to know when any tax changes might reasonably be in place. Anything else about the tone of the administration (eg, will it become more orderly and less unpredictable?) will be grasped on.

The market reaction to the address matters a lot, because the past couple of weeks have seen one of the longest bull runs for US equities that they have ever had. Something needs to happen to justify this, and the background driver has been the promise of tax reform. Analysts spend their life crawling over whatever scraps of information that emerge and deducing what these might mean for companies. So I will be interested in the commentary as much as the share movements. Actually I think there will be disappointment because expectations have been artificially raised. But let’s see.

Next there is the UK economy. There was a strong finish to last year but worries that growth will fade this. The best forward indicators for the economy are the purchasing manager indices, where companies are asked what they think will happen to their own business. We get these PMIs for the different parts of the UK economy, manufacturing, construction and services, on Wednesday, Thursday and Friday. If they remain strong any slowdown would be likely to be postponed until the second half of the year.

This will be a week where European politics are at the forefront, as the Dutch and French elections approach. But I’m intrigued and concerned about the Greek debt renegotiations, now at a critical state. They may rumble on and their deadline is not until the summer, but there is always the possibility of a sudden eruption and the markets were very nervous last week. Paradoxically the eurozone economy as a whole seems to have picked up a little speed, but the Greek debt remains a huge drag on their country’s economic performance.

Finally, on Friday there is some data from the ONS about the UK population that will show how the population has changed, what has caused it to change, and how it is projected to change in the future. It will also look at how this compares with some other European countries. Social data is always fascinating, and rather more so than a lot of the economic stuff.