The Economic Week Ahead: August 26-30

This week will include the first clues on the economy's performance in August. We're expecting to see confirmation of ongoing labor market strength in the month's consumer confidence survey (Tue) and initial unemployment claims (Thu). Some of August's improvement should be a bounce back from July's weather-depressed economic activity, which may be reflected in July's personal income release (Fri). July's consumer spending (Fri) might surprise to the upside (as did retail sales). July's PCED inflation rate (Fri) is unlikely to ruffle the Fed's dovish feathers.

More of August's economic data in coming weeks should be stronger-than-expected and lift the 10-year Treasury yield back above 4.00%. The yield curve spread could turn positive in the next few weeks. This could be a bullish signal for cyclical sectors such as S&P 500 Financials, Industrials, and Materials, which could outperform the S&P 500 over the rest of this year after underperforming it ytd (chart).