Budget Resolution Eases Market Volatility
Equities were somewhat mixed last week as markets calmed slightly by the end of the week.
Late Saturday, Congress passed a continuing resolution to avert a government shutdown. It allows for federal funding at the current rate for 45 days and time to hash out items left out of the resolution, most notably funding for Ukraine. Meanwhile, markets continue to grapple with the idea that interest rates could remain elevated. Fed futures are still predicting no rate hike in November (74% probability) and no rate hike in December (55% probability). There are a bevy of Fed speakers this week, including Fed Chairman Powell on Monday, which could shift the futures on future rate decisions, depending upon what is said.
The economic picture remains solid as the National Financial Conditions Index and the Financial Stress Index, both maintained by the Fed, show loose financial conditions.
The economic data was encouraging last week as Jobless Claims remained low and consumer demand was steady. Durable Goods orders saw a nice rebound in August, while consumer spending and personal income were positive. The PCE Price Index, the Fed’s favorite measure of inflation, indicated average inflation (by historical standards) in August. The Fed's own model of Gross Domestic Product for the third quarter remains high at +4.9%. With an ugly September behind us, the remainder of the year could be calmer if seasonality holds true.
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