The Table Has Been Set

Weekly Market Update | October 12, 2021

Highlights

Stocks posted modest gains across most regions as U.S. lawmakers appeared on track to temporarily avert hitting the nation’s debt ceiling. In the U.S., the S&P 500 climbed 0.8% while the NASDAQ eked out a 0.1% gain. Non-U.S. markets posted modest gains as well with both European and Emerging Market stocks adding 0.9%. Japanese stocks underperformed – pulling back 2.3%. The 10-year U.S. Treasury yield jumped 15 basis points from 1.46% to 1.61%.

The table has potentially been set for an awkward Thanksgiving dinner with Republicans and Democrats on the verge of pushing back the debt ceiling debate until December 3. As it stands now, Democrats will likely use the time to finalize the details on their social infrastructure bill and to close ranks in order to lift the debt ceiling and replace the continuing resolution being used to fund the federal government through December 3 with permanent funding. We are hopeful that the extra time will be used productively, but no immediate crisis may also mean no immediate action.

The September employment report was weaker-than-expected, but likely good enough to give the Federal Reserve the green light for announcing a tapering of their bond purchases at their November 3 meeting. . In our view, it would likely take a very weak 3Q 2021 real gross domestic product (GDP) print on October 28 to change their stance.