Last week several stressors caused volatility to increase.
Will it be short lived or are the concerns sustainable?
Economic indicators have started to skew as a result of Hurricane Harvey and soon we will begin to see the impacts of Irma. This is the least of the concerns to come of the storms, but is relevant to the economic landscape. Last week’s initial jobless claims increased dramatically over the prior week. This is only the first sign of the skew to economic indicators and performance we are likely to see over the next several months. With the recent fall-out from Harvey the combined expenses were causing drastic concern.
As the week wore on, more and more speculation stirred around North Korea testing additional missiles on Saturday, the anniversary of the sovereignty. The ongoing back and forth with North Korea causes risk on and off environments as tensions strengthen and ease repeatedly.
The likelihood of a 3rd rake hike in 2017 has diminished greatly as inflation wanes, wage growth is stagnant, and unemployment has leveled out. The FRB was dealt a blow this week as Vice Chair Fischer submitted his resignation. The FRB usually consists of seven members and with the resignation of Fischer has now fallen to merely three members.
For all the volatility, much of the information is temporal. Lives harmed or even lost can never recover, but natural disasters pass and cities rebuild. Geo-political tensions rise and fade, both of which are not predictable. The FRB, however, is predictable. Recent economic softness has led the FRB to leave monetary policy looser than they would like. Their actions should stabilize stock prices… in the short-term.
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