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Week in Review

Week Ending: Friday, September 22, 2017

Recap & Commentary

U.S. equity markets were little changed during a week that saw President Trump and North Korean leader Kim Jong-Un continue to trade barbs. 

In a widely expected move, the Federal Reserve voted to hold rates pat, and to begin reducing its balance sheet in October. The plan, which the Fed first disclosed at its June meeting, does not actually involve the sale of securities.  Instead, it calls for reducing the reinvestment of principal payments received from securities currently held on their balance sheet. Initially, the Fed will curtail its purchases of Treasury and Agency securities by $10B/month. That amount will increase quarterly until it reaches $50B/month in October 2018.  Thereafter, the $50B/month run rate will be maintained until such time that the Fed believes it has reduced its balance sheet to an appropriate size. As one economist recently described it, the Fed’s plan is akin to someone announcing that they plan to lose weight by simply eating two desserts as opposed to three.

Over the weekend, Angela Merkel won a fourth term as German Chancellor.  However,  her party captured just 1/3 of the vote, down from over 41% four years ago. At the same time, a far-right party won 13% of the vote, making it the first far-right party in more than 60 years to gain entry into parliament. Merkel will need to form a coalition to govern, a job made more difficult by her own party’s losses and an announcement by  her former coalition party that it now plans to be in the opposition. 

Economic Bullet Points

Data out of the housing sector was mixed, the Housing Market Index showed a tapering in September with the index matching July as the weakest month of the year. Housing Starts for August were slightly higher than expected, though effects of Harvey were seen in the South which posted a -7.9% decline in starts. Permits, however, were especially strong, and adding to that strength, the prior month was revised higher. It is expected that Irma will continue to impact this reading in next month’s report. Existing Home Sales for August came in at the low end of estimate expectations with a -1.7% monthly decline, though prices have been much stronger than sales, boasting a 5.6% year-over-year gain.

Regional manufacturing data continues to be strong, the Philadelphia Fed Business Outlook jumped 5 points in September and was well above even high estimates. Input figures across the board are showing some of the strongest readings of the expansion. The strength of this report, along with other regional surveys, continues to contrast the more subdued government data so far this year.

Leading Indicators posted a solid 0.4% gain in August, consumer expectations and ISM new orders were particularly strong contributors. The report indicates that underlying economic trends point to a continued steady pace of solid growth. Jobless Claims fell an unexpected -23K in the week, most likely reflecting the inability of workers in states affected by hurricanes to file claims.

Of Note

  • According to Barron’s, the S&P 500 traded in a 12.3-point range last week, or just 0.49% from its top to its bottom. That marked the lowest such percentage since 1972. 


Market Indices Week of 9/22

S&P 500                     0.1%

Russell 2000              1.3%

MSCI EAFE                0.7%

MSCI EM                   0.0%

Commodities          -0.4%

Barclay’s Agg.          -0.2%

US Dollar Index        0.3%

10-Yr Yield               2.26%

Oil ($/bl)                       $51

Gold ($/oz)              $1,295


The Week Ahead

  • Case-Shiller HPI
  • New Home Sales
  • Durable Goods Orders
  • International Trade in Goods
  • GDP
  • Consumer Confidence
  • Consumer Sentiment
  • Personal Income & Outlays
  • Jobless Claims


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