High Impact Events – July 2021 Week 4 #FOMC #PCE

Here are the high Impact Events for this coming week

  • Undoubtedly the highest impact event this coming week is the FOMC Statement followed by the FOMC Press Conference on 29 July.

The July 29 July FOMC Statement and Press Conference will be the Fed’s last chance for any hints as any potential tapering announcements after will be either at the Jackson Hole symposium in August or the September policy meeting. Read about the potential timeline here

What is now complicating matters is the escalation in virus cases due to the highly contagious Delta variant of Covid-19, which has now become the dominant strain in the United States. Caution about the growth impact from the Delta variant could widen the divisions within the FOMC on how soon the $120 billion a month in QE needs to be pared back. Expect higher risk of mixed signals from the FOMC statement vs the FOMC Press Conference .

The above plus the no end in sight regarding the federal borrowing limit which i mentioned here expiring in 31 July 2021 may result in higher market volatility in the last week of July. Prepare for a spike in VIX, TNX and possibly gold.

The PCE Price Index differs from Core CPI in that it only measures goods and services targeted towards and consumed by individuals. Prices are weighted according to total expenditure per item which gives important insights into consumer spending behavior.

America’s housing market is booming on the back of pent up demand and the pandemic-induced trend to move out of cities into larger suburban homes. However, housing construction has been hit not only by shortages in materials such as lumber but in labour as well. So the sector is being watched closely right now for signs on how long these issues will persist to get clues on the bigger question about whether higher inflation is transitory or not.

The US economy is expected to have expanded by a staggering 8% annualized rate in the three months to June, surpassing the pre-pandemic peak in GDP. Higher price pressure means inflation which again points to a high likelihood for sell off in growth stocks… again

In summary,

Prepare for a spike in VIX, TNX and possibly gold and sell off in growth stocks this week. Another week of volatile movements

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