Politics and markets no longer intersect, but essentially are occupying the same terrain. After months of not paying attention to the tumult in Washington, Wall Street is now taking notice, and that sets up an interesting week ahead for investors in a month that is often a dull slog lower.
All eyes on the White House
Friday's surprise exit of Steve Bannon from the Trump administration dominated investor talk. Donald Trump's closest political advisor no longer has access to the Oval Office and takes a controversial and confrontational brand of economic populism with him.
The Bannon announcement temporarily pulled the major averages out of a funk that came on top of a steep drop Thursday.
However, the day ended with stocks dipping back lower. Whether that momentum carries over into a week that will be otherwise fairly light on news will be the biggest question. Despite a shaky August, the Dow is still up nearly 10 percent for the year, but a growing chorus of experts is calling for a pullback anytime now.
See you at Jackson Hole
For years investors kept their sights set strongly on the Federal Reserve, the U.S. central bank that regulates financial institutions and helps determine the interest rates for most forms of consumer debt.
However, with the Fed on a more predictable path and market participants hoping the economy is strong enough to stand on its own, the institution's importance has faded some. That will change this week.
Central bankers gather each year in Jackson Hole, Wyoming, to discuss various heady topics of importance. This year's theme: "Fostering a Dynamic Global Economy."
The meeting will take place Thursday through Saturday, with the highlight being a speech Friday from Chair Janet Yellen, who will speak about financial stability. It may not sound terribly exciting, but Fed officials have made news here plenty of times in the past. [You might recall former Ben Bernanke's speech back in 2010 that paved the way for the second round of the Fed's "money-printing" stimulus program.]
Sharp investors will be listening to what clues Yellen will leave for the path ahead, particularly since inflation has been such a non-factor for the U.S. economy this year.
The growing economy
Hopes are getting higher that the economy finally will start picking up in the second half of the year.
The Atlanta Fed is currently forecasting that gross domestic product will increase by a whopping 3.8 percent in the third quarter, which would be well ahead of the 1.9 percent in the first half of the year and the fastest quarterly rise in three years.
While there aren't a lot of data releases coming up this week, there will be a few key figures.
Wednesday will bring new home sales, while Thursday will see existing home sales. The week closes out Friday with the durable goods report, which gauges how much demand there is for items like washing machines, refrigerators and other long-lasting items.
The last word: Eclipses are bullish!
Star gazing will give way to sun gazing Monday when all eyes [wear something protective!] will turn to the sky for the solar eclipse.
Wall Street investing experts love a good gimmick, and Ryan Detrick, the senior market strategist at LPL Financial, is no exception. Detrick has studied past eclipses — there hasn't been one since the early 1990s — and has found a positive trend:
"Are the stars aligned for a major equity correction due to the eclipse? Fortunately, when a total solar eclipse has been seen in the U.S. since 1900, equity prices are up 17.2 percent a year later. So it appears our biggest worry isn't what stocks might do, but whether those glasses we bought online are officially approved by NASA!
"Using data from NASA back to 1900 shows that it has been 26 years since the last total eclipse was visible in one of the 50 U.S. states, which more than doubled the previous longest streak of 11 years. Also, if you miss this one, you'll have to wait another six years for the next one."
"Should you ever invest based on the solar system? Absolutely not, as things like fundamentals, valuations, and technicals are still what will drive markets. Nonetheless, this once-a-life time event has many wondering what stocks have done around previous eclipses and the good news is the world doesn't end and equity gains are very common."