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August 23, 2021 - Weekly Market Insights: Will the Fed Taper in 2021?

August 23, 2021
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Stocks turned lower last week amid the increasing probability of a Fed tapering, mixed economic data, and growing concerns about the economic impact of the Delta variant.

The Dow Jones Industrial Average slumped 1.11%, while the Standard & Poor’s 500 lost 0.59%. The Nasdaq Composite index slipped 0.73%. The MSCI EAFE index, which tracks developed overseas stock markets, surrendered 2.94%.1,2,3

 


Unsettling News

After the Dow Industrials and S&P 500 index climbed to new record highs to begin the week, stocks pulled back amid weaker-than-expected retail sales, festering concerns about the Delta variant, and slowing growth in China.

The stock market retreat accelerated mid-week with the release of the FOMC (Federal Open Market Committee) meeting minutes, which signaled that Fed officials may be ready to begin reducing its monthly bond purchases before the end of the year. Stocks managed to stabilize on Friday, paring some of the week’s losses. Consumer staples, health care, real estate, and utilities were the top-performing groups.4

Taper by Year End?

Two weeks ago, multiple regional Federal Reserve Bank presidents suggested that the economy was strong enough to justify tapering the Fed’s monthly bond purchases.

Last week, that chorus grew a bit louder with the release of minutes from July’s FOMC (Federal Open Market Committee) meeting. The precise timing was left undecided, with some officials believing it should begin before year-end, while others thought waiting until the start of the new year was the better choice.5

This Week: Key Economic Data

Monday: Existing Home Sales. PMI (Purchasing Managers’ Index) Composite Flash.

Tuesday: New Home Sales.

Wednesday: Durable Goods Orders.

Thursday: Jobless Claims. Gross Domestic Product (GDP).

Friday: Consumer Sentiment.

Source: Econoday, August 20, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

 

Footnotes and Sources

  1. The Wall Street Journal, August 20, 2021
  2. The Wall Street Journal, August 20, 2021
  3. The Wall Street Journal, August 20, 2021
  4. ALPS Portfolio Solutions, August 20, 2021
  5. Reuters.com, August 19, 2021