Week of November 1, 2021

U.S equities closed out October last Friday with all three major indices finishing at record highs.  The S&P 500 and NASDAQ posted their best months since November 2020.  For the month of October, the Dow gained 5.8% and the S&P 500 added 6.9%.  The tech-heavy NASDAQ surged 7.3%.  The month marked a rebound from September, when all three major indices declined.

The Federal Open Market Committee (FOMC) is set to meet this Tuesday and Wednesday, with the policy statement and press conference from the meeting serving as the central bank’s opportunity to announce formal plans to begin rolling back (or taper) its crisis-era quantitative easing program.  For the past 18 months, the Fed has been purchasing $120 billion per month in mortgage-backed securities and Treasuries as a major monetary policy tool for adding liquidity to the economy.

“The upcoming FOMC meeting will be important for three reasons: 1) the announcement of tapering; 2) guidance around what tapering means for the path of hikes; and 3) nuanced changes in views around inflation risks given recent data,” wrote Bank of America economist Michelle Meyer in a note.

Given the market has been anticipating the start to tapering for several months now, speculation around when the Fed will make a move on interest rates has become a primary focus of many investors.  Economists and investors alike have mulled whether the Fed may need to act more quickly than previously suggested on adjusting interest rates to fight off inflation, which has proven to be more longer lasting than some had suggested.