The markets were up again on lighter than average trading volume. The Dow gained 26 points and closed at 22,024.
The markets continue to show that they are focused on the fundamentals as opposed to the politics. We saw it with the news on North Korea, and now with the disbanding of the Strategy and Policy Council, as well as the Manufacturing Council, the markets continues to stabilize and even grow amidst political turmoil. These councils were formed as an effort to generate ideas and policies that would continue to strengthen the economy, however, considering they met very infrequently (and there’s no guarantee they would’ve actually accomplished anything even if they did meet) it’s hard to know how much of a missed opportunity this will be.
The Fed released the meeting minutes from their July session. While there were concerns over certain valuations, like housing, there were actually no red flags about the valuations of the stock market. The discussion whether to raise interest rates hinged on whether inflation will continue to be soft, or is about to boom. Given that they couldn’t really come to a determination, the decision whether to raise rates another ¼ point probably won’t be decided until December. Instead, there is a lot more consensus about the unwinding of the balance sheet, because those worried about inflation believe this will help to tighten credit, and those that are dovish about inflation don’t think it will have a major impact. However, they did not set a specified date to start doing this, and instead decided to kick the can down the road for an upcoming session which should take place in September.
Speaking of housing valuations, July housing data was released today. The main take-away is the complete shift from multi-unit building to single-family building. Multi-unit housing starts are down 33.7% from a year ago, while single-family housing starts are up almost 11%.