Economy
The Fed chose to leave rates unchanged at their meeting this week, a decision that was mostly in-line with expectations. There's growing pressure on the Fed, both from the outside and within, to raise rates in response to elevated inflation readings we've seen of late. There were three members of the Federal Open Market Committee that voted against leaving rates unchanged, instead favoring a rate hike. Fed Chair Kevin Warsh referred to the dissents as a "family fight." The next expected opportunity for the Fed to raise rates doesn't come until mid-September, although we'll hear from Fed officials between now and then at the annual symposium in Jackson Hole later this month. The bond market is now expecting to see a rate hike the next time Warsh takes the podium after Labor Day.
Markets
The S&P 500 posted a gain of 1.05% this week in a back-and-forth week of trading. Markets were volatile throughout Wednesday as the Fed announced their decision with interest rates, but stocks recovered and finished on a positive note by Friday's close. Amazon's stellar quarterly earnings report was able to help tech stocks rally after it reported Thursday. Earnings season is now mostly in the rearview mirror, and results have been great to this point. More companies than historically average are beating their estimated earnings figures, and the margin by which they are beating is also higher than historical averages. While the equity markets moved higher this week, bond yields also moved higher, sending the prices of existing bonds lower. Higher longer term bond yields can be interpreted as the market saying we are heading towards higher inflation. They also mean we're likely to see higher mortgage rates, which hit their highest level in a year this week,.
What We're Reading
- Coordinating 401(k) Contributions With Your Spouse - Center for Retirement Research
- No Rate Hike. Higher Rates. - JC Parets
Have a great weekend.
Dogwood Wealth Management