For what is typically a quiet week in August, the market must digest a package of important market-moving data releases, the President’s visit to Texas in the wake of Hurricane Harvey and the beginning of his tax reform roadshow—all underpinned by a low volume market—Prudential’s Chief Market Strategist Quincy Krosby said Monday in her weekly “Connecting the Dots” outlook.
Harvey, and the damage the storm is bringing, is proving an unwelcome distraction for this week’s normal flow of economic data. Focus will be on human suffering emanating from the hurricane, while the market will keep an eye on the energy sector as Texas refineries shut down one after another, which could put upward pressure on gasoline prices.
“We have low volume, which means that headlines can move the market one direction or the other,” Krosby said. “This quiet week in August will not be so quiet. Above all else, we’ll be focused on the heroics of getting people to safe haven in Texas.”
And that comes after last week’s Jackson Hole, Wyoming, Economic Policy Symposium, which rendered little in the way of monetary guidance from its main stars—Mario Draghi and Janet Yellen. Draghi’s comments about a synchronized global recovery did have some effect by pushing the euro higher by 1 percent (unofficial chatter suggested Draghi’s goal may have been trying to bring the euro lower.) Yellen’s comments, while short on clues about U.S. monetary policy, suggested her position surrounding regulatory reform remains solidly cautious.
“In any case, a stronger euro means a weaker U.S. dollar, and that’s good for U.S. exporters,” Krosby said.
The main economic event this week with implications for future monetary policy will be Friday’s employment situation numbers. If the numbers are strong, particularly regarding wages, predictions for a Fed rate hike in December could move higher. Analysts will be watching Wednesday’s ADP National Jobs Report on private sector employment and try to extrapolate the important official government number Friday, but there is not 100 percent positive correlation between the two reports, she said.
President Trump will be traveling to Texas in the aftermath of the hurricane, and also will be kicking off his tax-reform roadshow this week. The market will be waiting to hear more details about the proposed process by which tax cuts will be legislated.
Also due out this week: the Case-Shiller Home Price Index, corporate profits, and the second of three estimates for the second quarter GDP, which may indicate whether the economy is gaining meaningful traction. Additionally, the market will pay attention to the Personal Income and Outlays report, an important indicator of consumer spending, auto sales figures, and on Friday, two different reports on manufacturing, which at 11% of GDP continues to be an important driver for the overall economy.
To talk to Quincy Krosby about her views of the market, contact Lisa M. Bennett or Dara Scerbo.
Read Quincy Krosby’s full Q3 Market Commentary: Third Quarter Checkup.
The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This is solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.