- A weak start to the week but stocks recovered.
- After the conclusion of the latest Fed meeting on Wednesday, stocks and Treasury yields moved higher and bonds declined. The Fed made no changes to policy but made further indications that investors should prepare for tapering to begin soon.
- On Thursday the Bank of England also left policy unchanged but indicated that a rate rise could be on the way with energy prices spiking and inflation rising.
- Investors are still in the dark with little news regarding the current situation of Chinese property developer Evergrande. The firm faces a potential default after it missed a deadline to make an interest payment to foreign bond holders. There has been no announcement and Evergrande entered a 30-day grace period in which the payment must be made or the company will be in default.
- Our Breadth indicator stayed neutral but our Momentum Indicator ticked lower again.
- Stocks opened sharply lower at the start of the week but recovered from there.
- The main concern was the fear of contagion from the crisis at Chinese property developer Evergrande and investors feared that the debt-ridden company was unlikely to receive direct government support. Global markets were quickly lower with some major indices falling to two-month lows. News of a restructuring plan for the company and a capital injection into the Chinese banking system helped sentiment improve.
- The two-day Fed meeting concluded on Wednesday with investors looking for the Fed to provide an update on the taper timing question. Speaking after the meeting Chairman Jerome Powell said that if the economy continued to improve a scaling back of the current asset purchasing program “is likely to be appropriate”, with the process beginning in November and completing by mid 2022. He said tapering “could come as soon as the next meeting.” The Fed’s statement said “a moderation in the pace of asset purchases may soon be warranted”. The word “may” indicating that a final decision has not yet been reached.
- Our Breadth Indicator stayed negative and our Momentum Indicator ticked down.
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