Weekly Economic Summary - 9/25/2017Submitted by Miller Financial Group, LLC on September 25th, 2017
After soaring to record highs in the prior week, US equity markets were mostly flat last week. The tech-heavy Nasdaq exchange, which has outpaced other US benchmarks in 2017, was negative on the week, while the S&P500 and Dow Jones Industrial Average inched higher.
Last week’s focus was on the Federal Reserve and the announcement that the central bank would begin its balance sheet normalization plan in October. ‘The Great Unwind’, as its being referred to by the financial media, is the Fed’s long-awaited program of monetary policy tightening, whereby the Fed begins to sell down its portfolio of Treasury bonds and mortgage-backed securities.
The Fed’s announcement to begin selling its bonds at a rate of $10 billion per month was largely expected and the market took the news in stride. The decision to leave interest rates unchanged was also expected, however the Fed did forecast the likelihood of at least one more rate hike in 2017.
The Federal Reserve’s gradual approach to monetary policy tightening has been well received by the market thus far, but the next phase of bond selling will likely put upward pressure on long-term interest rates over the next several years.
In other news, economic data was positive last week with reports continuing to point to strong labor market conditions and a moderately growing economy. Oil prices posted another weekly advance trading above $50 per barrel for the first time since the beginning of summer while gold prices hovered near $1,300 per oz.
Stocks have come under pressure to begin the new week after a statement Monday from North Korean Foreign Minister Ri Yong Ho that claimed the right for North Korea to shoot down US war planes. The rhetoric has ramped up between North Korea and the US in the last week during the United Nations General Assembly. Technology shares are also weighing down the market Monday, as Apple’s stock continued its four day skid on concerns over demand of the new iPhone X.
The last week of September looks to be light on the economic news front, but market direction should firm up as we head into Q3 earnings season in just a couple weeks.
Have a great week!