Weekly Stock Market Report: FOMC, Debt Ceiling & Taxes

Key Drivers for the Week of Sept. 20, 2021

TIP – This is a 1-minute brief bullet-point summary. It is a tool that gives investors and financial a fast and simple list of what to watch for and talking points for the week.

  • FOMC, BoE, BoJ, SNB lead a gaggle of 13 central bank meetings this week
  • US Congress debt limit debate
  • Fed expected on hold but guidance likely points to late 2021 taper announcement
  • Focus on FOMC projections and especially the dot plot including the 2024 estimate
  • BoE already signaled a hawkish rate outlook, but is not likely to push it forward
  • BoJ firmly on hold, expected to downgrade the outlook on growth, production
  • SNB to maintain negative rates, look to other CBs for policy course
  • U.S. data on housing starts, new and existing home sales, jobless claims
  • Canada’s election Monday polls showing a dead heat
  • Public holidays in Japan, China, Korea, Taiwan, HK to lighten activity
  • Eurozone preliminary PMIs; German Ifo confidence index, PPI due
  • UK data on preliminary PMIs, CBI industrial trends, GfK confidence
S&P 5004432.98−0.91%−40.784471.524427.76Bear
Crude (WTI)70.458-2.00%1.43672.05670.182Neutral
10 Year132.60%−2.86%−0.0391.3721.323Neutral
US Dollar Index93.3790.14%0.13393.45393.205Strong Bull
VIX25.422.06%4.5925.7724.15Strong Bull

Week Ahead: FOMC, Debt Ceiling & Taxes

In the U.S. the FOMC is front and center. There has been considerable angst since before the August Jackson Hole summit whether the Fed would be announcing a timeline for QE tapering by the fall. Clearly, a lot of progress has been made since the pandemic and indeed some indicators are above their pre-pandemic levels. And the question for the Committee is whether there has been “substantial further progress.”

We don’t believe so and we suspect that will be the consensus vote too. Signs of slipping Q3 growth should give policymakers pause, indeed we revised down our Q3 GDP forecast to a 5.6% pace of growth from 7.0% previously. Additionally, Chair Powell indicated at the July 28 press conference there was still “substantial slack” in the labor market and the disappointing 235k increase in jobs in August supports that view. His assessment and the various headwinds seen over the last 8 weeks should keep policymakers on a cautious, wait-and-see course, though hinting at a likely taper announcement later this year.


Along with any indication of QE tapering, much of the attention will be on the Summary of Economic Projections (SEP) and especially the dots that will be included. Will the median dot be pulled forward to reflect a rate hike in 2022? Will, there be more hikes included, and how many will be seen for 2024?

We expect the Fed to mostly repeat their funds rate estimates, though with some up-drift, and an upshift in the 2023 median to 0.6% from 0.4%. Estimates will be introduced for 2024, and we expect these figures to largely mimic the current 2023 growth and inflation estimates, with a 1.4% median funds rate estimate. As for the other projections, we expect a sharp cut for 2021 GDP growth, huge 2021 boosts in the PCE chain price estimates, and a slight lift in jobless rate estimates.

The 10YR should be moving up but is still below the 200MA. Expect to see movement after the FOMC.

For GDP, we expect trimmings of -0.6% for the Fed’s 6.8%-7.3% central tendency, versus our current 6.1% forecast. We expect 0.8% increases for the headline PCE chain price forecasts and 0.4% for the core estimates from respective June central tendencies of 3.1%-3.5% and 2.9%-3.1%, versus our own projections of 4.4% and 3.6%. We expect slight upward revisions to the jobless rate of 0.1% in the June 4.4%-4.8% central tendency, versus our own 4.7% estimate.

Housing data highlight this week’s economic calendar. The market continues to be pushed and pulled by numerous factors, including the pandemic social changes, low mortgage rates, record prices, and labor/materials shortages. Housing starts (Tuesday) are expected to rebound to a 1.580 mln pace after dropping -7.0% to 1.534 mln in July and versus 1.650 mln in June. Starts were at a 15-year high of 1.725 mln in March. Permits are expected to improve to 1.660 mln after rising 2.6% to 1.635 mln in June. Existing home sales (Wednesday) are seen falling -2.8% to a 5.820 mln pace in August, after rising 2.0% to 5.990 mln in July.

This compares to a 14-year high of 6.860 mln in October. New home sales (Friday) are estimated to climb 4.5% to a 740k pace after rising 1.0% to a 708k clip. Other data this week include the NAHB housing market index (Monday), the Q2 current account (Tuesday), and jobless claims (Thursday).

While attention will be on the FOMC, fiscal policy negotiations, or rather wrangling, will be an important undercurrent for the markets. Congress is working on a variety of “infrastructure” bills, including the $3.5 bln blueprint, along with hefty tax proposals. It is likely to be over 10,000 pages when has not been released.

Perhaps most crucial government funding where the current budget authority expires at the end of the month. The debt limit is also in view with the special maneuvering to avoid the ceiling potentially running out in mid-October. As we mentioned last week, Republicans appear to be united in fighting against raising the debt ceiling limit and increased spending bills. The Democrats’ strategy appears to delay and create a sense of “urgency” so that they can pass the bills.

This week the Democrats were given a setback in passing their $3.5 trillion spending bill because Joe Manchin publicly repeated he won’t support the $3.5 trillion spending bill which they needed him to pass through reconciliation. This will likely cause the Democrat strategy of creating urgency of passing something to backfire on them. This has caused the bi-partisan infrastructure bill to be in jeopardy.

A shutdown is not likely because I think that Democrats will give away their hopes of passing their large spending bills and new taxes because they will be seen as responsible. The biggest challenge will be for Democrats to get their far-left members of Congress to agree to a much smaller spending package. The markets will be volatile and definitely react to shut-down fears in the next couple of weeks. If there is a shutdown, we think there could be a 10% dip.

Also on tap are a few more earnings reports, including Lennar (Monday); Adobe, FedEx, Autozone (Tuesday); General Mills (Wednesday); Nike, Accenture, Costco, Darden Restaurants, Trop.com, and Vail Resorts (Thursday).

Canada’s calendar is thin this week. However, there is one big event on the docket, the Federal election (Monday), with the latest polls showing a virtual dead heat. As for data, retail sales is the lone highlight. The report is for July, and hence will not answer the key question on the minds of many in the market — “

To what extent has the Delta variant and related pick-up restrictions impacted the consumer sector?” The flow of data from the U.S. shows that the consumer stateside has been resilient, suggestive of similar durability in Canada. In the meantime, the July retail sales report is expected to show a drop in total sales of -1.2% after the 4.2% bounce in June. The ex-autos sales aggregate is projected to contract -1.5% after the 4.7% jump in June. Recall that sales saw hefty declines in April and May.


Did you like our excerpt and would you like to read the full report?  

The Advisor Market Intelligence Report helps financial advisor advisors and investors save time, cut through the noise, and outperform through unbiased professional market research

“Better info than the big investment companies. Your report is the only thing I consistently read to know what is happening and when to adjust portfolios.”  Dennis

Sign up now for $19.95 or save more money by paying annually $99.95. (click here for annual).

The Advisor Market Intelligence Report Includes:

  • Key Market Drivers – Know what is directly affecting the markets.
  • Index & Sector Trends – Determine which sectors or areas are trending up or down.
  • Global Market Analysis – Get a high-level picture of the US and global economy.
  • Stocks to Watch – High-quality blue-chip and dividend income stocks to watch.
  • Economic Calendar – Find out what is happening this week.
  • Special Reports – Get critical insider insight on key market movers such as inflation, tax bills, and unique events.
Free AlphaBetaStock's Cheat Sheet (No CC)!+ Bonus Dividend Stock Picks
Scroll to Top