July 2017: More Wait-and-See
US 10-yr yields were climbing in early July as geopolitical tension and drama in DC faded.The increase was short-lived, however. Weak data in the middle of the month drove yields lower. Wage pressure abated even though June hiring was robust, and inflation indicators remained soft while the trade-weighted dollar fell 1.3%. Q2 GDP grew 2.6%, better thanin Q1 but weaker than initially expected. The Fed maintained its conviction price softness is transitory and gradual tightening remains necessary, though no policy changes in July meant wait-and-see prevailed. Balance sheet reduction is slated to being “relatively soon,” hinting at a September announcement and delaying a possible third 2017 hike until December. Traders are not convinced data support another hike, however. Rumors fromacross the pond hinted the ECB is considering discussing the possibility of ending its QE program on solid eurozone data. Draghi was quick to stress, however, the asset purchase program will continue for the foreseeable future. Equities continued to edge higher, with the S&P 500 rising for a fourth straight month as investors focused on improving earnings and optimism for global growth.