July 26 Federal Reserve next interest-rate decision. Rate hike not happening, but shot for start of balance-sheet unwind. September more likely. July 28 U.S. GDP reported. We’d put money around 2.3%-2.8%. Tone out of Fed is back to 2% growth this year. July 31 Congress deadline ahead of summer recess. Incentive for GOP senators on healthcare reformwent up after McConnell threatens to cancel the first two weeks of August recess. August 1 Fed’s main inflation gauge (PCE) released. Oil prices will hold it back, slight uptick at best. August 11 Second major inflation gauge (CPI) released. Again, oil prices will weigh... best-case scenario is slight improvement.
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And while Federal Reserve Chair Janet Yellen sounded more dovish than she had in the recent past regarding inflation, she still said the Fed was maintaining its course for four more rate hikes by the end of 2018, and would soon commence winding down the balance sheet. This rhetoric was meant to send a signal to borrowers that the period of low rates and easy money may soon be coming to an end... June 28 Fed’s stress test passes banks with flying colors Thirty-three of 34 banks tested passed with flying colors. (The exception was Capital One.) Consequently, buybacks and dividends were raised across the board. Investors have been flocking to the space ever since. Bloomberg estimates the capital return amount by the banks being tested to be around $120 billion. To boot, the expected rise in yields around global central bank commentary is viewed positively for the space as it should boost net interest margins. June 21 MSCI approves China addition Global index provider MSCI will add mainland Chinese stocks to one of its key benchmarks and could pull more than $400 billion of funds from asset managers, pension funds, and insurers into mainland China’s equity markets over the next decade.
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American Consequences | 17
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