The Week Ahead
February 20th – 24th, 2017
February 20th starts a holiday-shortened week as US markets will be closed Monday, February 19th in observance of Presidents Day. Federal Reserve Bank Presidents Neel Kashkari (Minneapolis), Patrick Harker (Philadelphia) and John Williams (San Francisco) speak Tuesday, February 21st at 8:50 AM, 12:00 PM and 3:30 PM Eastern time respectively. Jerome Powell (Fed Governor) will speak at 1:00 PM Eastern on Wednesday ahead of the 2:00 PM release of the FOMC minutes. Federal Reserve President Dennis Lockhart (Atlanta) will speak Thursday morning at 8:35 AM Eastern.
The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average rose 1.49-1.79% last week. The CBOE Volatility Index or “VIX” rose .64% to 11.49%, well below the post credit crisis average of 18.7%. For a more in-depth understanding of the current state of volatility in the US equity markets I encourage you to read Mark Guthner’s recent post “The Real Reason for the Collapse in Volatility“.
According to Bureau of Labor and Statistics CPI data, inflation has moved higher, from a late 2015 low of .7% annualized to 2.5% currently. However, the Fed prefers the historically more stable measure, the BEA’s Personal Consumption Expenditures, or “PCE”, the most recent measure of which still showed Core inflation at 1.7% and Headline inflation at 1.62%. Both remain below the Fed’s 2% inflation target. Combine below target inflation measures with dovish comments from the like’s of San Francisco Federal Reserve President John Williams last August, and we continue to expect the pace of rate increases to be gradual.
Trade Well,
Brad Holt and The Options Edge Team
“Nothing gives one person so much advantage over another as to remain always cool and unruffled under all circumstances” –Thomas Jefferson (3rd President of The United States, 1743-1826)
On Deck
- New home sales (F). Prior – 536K / Consensus – 576K. Range (538K-600K).
- Existing home sales (W). Prior – 5.49 M / Consensus – 5.575 M.
- Crude inventories (Th). Prior 9.52 M. WTI Crude Price declined ~1.0% last week.
- FOMC minutes will be released.
(source Bloomberg)
