Weighing the Week Ahead: Will a More Aggressive Fed Spark the Long-Awaited Correction?

We have a light calendar for economic data. The week’s focus will be the FOMC policy announcement on Wednesday. Given the resilience of the market rally in the face of various natural and human threats, the punditry will turn to a favored topic. Expect people to be asking:

Will the Fed be the catalyst for a market correction?

Last Week Recap

My expectation for last week was only partly correct. There was plenty of competing news and not much optimism about a market-friendly legislative agenda.

The Story in One Chart

I always start my personal review of the week by looking at this great chart from Doug Short via Jill Mislinski. Monday’s big rally was sparked by the weakening of Irma and lowered damage estimates. After some follow through on Tuesday, the market was flat for the rest of the week.

Doug has a special knack for pulling together all the relevant information. His charts save more than a thousand words! Read the entire post for several more charts providing long-term perspective, including the size and frequency of drawdowns.

Personal Note

I am off next Saturday, so there might not be a WTWA post. If I can, I will do an abbreviated version, but it might be a day late.

The Silver Bullet

As I indicated recently I am moving the Silver Bullet award to a standalone feature, rather than an item in WTWA. I hope that readers and past winners, listed here, will help me in giving special recognition to those who help to keep data honest. As always, nominations are welcome!

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

There was little economic news, but it was generally positive. The negatives were not very significant.

The Good

  • U.S. median income increases for the second year in a row. Christopher Matthews (Axios) has details.

  • Corporate executives remain optimistic about the economy. Avondale conference call summaries provide great context for the data we follow.
  • Initial jobless claims moved lower, despite the Harvey and Irma effects. Bespoke charts the data and New Deal Democrat shows how a hurricane adjustment makes the picture even better, 239,000. Eddy Elfenbein also weighs in.