What We Learned Last Week
- For just a moment, equity markets became untethered from economic reality, likely damaging the reputation of the asset class as an alternative to the low-yielding fixed income alternatives.
- Economic reports, including home sales, house prices, durable goods, the 2Q Gross Domestic Product revision, jobless claims and broad consumer spending, were more favorable than consensus expectations.
What We Expect to See in the Week Ahead
- This week’s loaded economic calendar, which concludes with the August jobs report—the first estimate of August payrolls has been revised up 80 percent of the time in the last 25 years and by an average of more than 40,000—is expected to nudge the Federal Reserve at its September 16-17 policy meeting to begin the slow process of moving its policy rate up from zero percent to a more normal level over time. Futures markets will likely lean in that direction as equity markets stabilize.
- Next week will thankfully bring a blackout period for Fed chatter—and time to think—before the key September policy meeting.