The Long and Short of it, week ending 24 Sep 2021

Publication Type: Market Commentaries

U.S. stock markets began the week on uneasy terms with Evergrande contagion concerns and FOMC
announcement anxiety pushing all three major indexes about 2% lower. U.S stock markets,
stagnating on Tuesday, moved higher the rest of the week, fortified by a somewhat-as-exprected
FOMC announcement and optimism Evergrande would avoid immediate default. Wednesday’s
FOMC announcement indicated the Fed would likely begin tapering November (with bond buybacks
to be eliminated by June next year) with at least one rate hike in 2022 followed by another 2-3 hikes
in 2023. The Fed’s willingness to slightly and gradually tighten its ultra-easy monetary policy
signalled it believed the U.S. economy was strong and at the same time eased investor concerns of
possible fallout from Fed inaction. Interestingly, the 10-year U.S Treasury rate, down 6bps through
Wednesday, jumped 13bps higher Thursday and another 2bp Friday perhaps as a delayed reaction
to the FOMC announcement and perhaps as a result of lessened Evergrande contagion fears. For the
week, the S&P 500 Index rose 0.5% to 4,455.48, the Nasdaq Composite Index was almost unchanged
at 15,047.70, the Dow Jones Industrial Average increased 0.6% to 34,797.60, the 10-year U.S.
Treasury rate increased 9bps to 1.45% and the U.S. dollar (as measured by the ICE U.S. Dollar index -
DXY) strengthened 0.1% percent.


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The Long and Short of it, week ending 24 Sep 2021

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