All Eyes on Washington, Jackson Hole

Today the 10 year T Yield dropped to 2.18%, the lowest in months.  Today’s “risk off” trade was spurred by last night’s Presidential speech in Phoenix that included a threat of a government shutdown if border wall funds are not approved by Congress.  Shutdown talk before September’s “must pass” debt ceiling increase definitely spooked markets.  September’s Congressional session is crucial:  debt ceiling, tax reform and/or tax cuts, budget or continuing resolution are all on the docket.   Recent feuding among politicians is not providing any certainty.   The old adage is that Wall Street loves gridlock, but that means “old school” gridlock where the government still was open and free of default.  This week’s annual Jackson Hole symposium features speeches by the world’s major central bankers.  Will this be an opportunity for the “big rotation” out of monetary policy hinted at by Draghi and Yellen earlier this year?  The ECB has already indicated that this will not be the time to announce their long anticipated tapering of bond buying, but that is coming soon.   The bankers are expected to discuss the “confusing” lack of inflation worldwide after nearly a decade of accommodating policy. Stay tuned.  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners