Last Week:

  • U.S. equities finished mixed for the week: The Dow Jones Industrial Average (DJIA) closed 81 points higher, or rose 0.37%, to 22,350. The Standard & Poor’s 500 (S&P 500) index gained 2 points, or rose 0.08%, to 2,502. The Nasdaq closed last week 0.33% lower at 6,427. Financial markets seem to be holding up despite the strong rhetoric from both the US and North Korea.
  • The Fed Balance Sheet: Last week, following the Federal Open Market Committee (FOMC) meeting, the Fed announced that it will begin its balance sheet normalization program in October. The Fed decided to maintain the federal funds rate between 1.00%-1.25%, citing the continued strength of the U.S. labor market and inflation remaining below the 2% target. As previously announced the balance sheet runoff will start with $6bn in Treasuries and $4bn in mortgage-backed securities per month, rising by $6bn and $4bn respectively once a quarter until a hard cap is reached at $30bn and $20bn respectively.

Fed Treasury Holdings Maturity Profile (Notes & Bonds, in $Billions)

Source: Strategas Research Partners

Look Ahead:

  • Key reports/items for the upcoming week include The S&P/Case-Shiller home price index (Jul), Federal Reserve Chair, Janet Yellen’s speech at the National Association for Business Economists, durable-goods orders (Aug), the final read on second-quarter GDP and personal income and spending data (Aug). The highlight of the week is an expected tax overhaul framework from the Trump Administration.