LAST WEEK’S HIGHLIGHTS
1. The equity market rebounded after a few down weeks. President Trump’s comments again moved markets. On the positive side, he discussed tax reform and on the negative, he would call for a government shutdown if funds were not allocated to the border wall. The DJIA was up 0.6%, the S&P improved 0.7% and the NASDAQ advanced 0.8%. Telecommunications (+2.0%) and basic materials (+1.7%) were best sector performers.
2. The dollar continued to back track. The euro reached a 1.192 one year high vs the dollar after neither Fed Reserve Chair Janet Yellen did not discuss monetary policy and European Union’s Draghi did not talk down Euro strength at the Jackson Hole conference.
3. Corporate credit spreads were unchanged in a light trading week. New supply was lower than average and front loaded.
4. The municipal market was unchanged for the week. Primary calendar is light with a $2b California general obligation bond the largest offering.
5. Geopolitics. US added sanctions to Venezuela in order to further the Maduro government.
THIS WEEK’S EXPECTATIONS
1. Economic data. Heavy week with July personal income (exp. 0.4% from 0.0%), July personal consumption (exp. 0.3% from 0.1%) and August non-farm payrolls (exp. +178,000 from +209,000) and unemployment rate (exp. 4.3% from 4.3%) in the forefront.
2. Tax reform. Discussion will be on businesses (eliminate deduction for net interest expenses, expensing of capital investments) and individuals (itemize deductions on mortgages, charities, etc).
3. Will debt ceiling continue to be a distraction?
4. Gulf Coast Hurricane Harvey-how much effect will it have on the residents, property and industry (most notably the energy sector).