While equities in the US have lost a little steam over the past few weeks, US large caps still remain in an intact upward trend:
Mid-Caps and Small-Caps have taken a brunt of the softness due to a weak US dollar and uncertainty around a tax reform bill being passed, which would primarily benefit both Mid- and Small-Caps.
On the economic front for the US, the Empire Manufacturing Index recently soared to its highest level since September 2014.
Retail Sales also rebounded more than expected in July.
As US equities and economic data continue to slowly push forward and bring positive news, inflation has yet to catch hold. Recent inflation data has been weak, much weaker than expected by Fed officials.
However, market participants believe the Fed will begin to monetize its balance sheet soon, which could begin as early as September.
With the weak inflation data, December would be the earliest for the Fed to hike rates next, but this still remains uncertain. The bond market is currently pricing in a 42% probability of a rate hike in December 2017.