Market Digest \u2013 Week Ending 9\/23\/16\r\n\r\nHighly anticipated announcements from the Fed and Bank of Japan failed to include dramatic policy, but were well received by markets.The Fed held interest rates steady but strongly hinted at a December hike. Three members dissented in favor of a hike, which is significant. The Bank of Japan said it intends to keep the 10 year note near zero but will let longer maturity bond yields rise. This was considered bullish for Japanese banks who are struggling with a flat yield curve. In Washington, lawmakers grilled Wells Fargo CEO John Stumpf regarding millions of accounts which may have been opened without full customer consent. The incident may bring about fresh scrutiny on major financial services companies.\r\n\r\nWeekly Returns:\r\n\r\nS&P 500: 2,165 (+1.2%)\r\nFTSE All-World ex-US: (+3.0%)\r\nUS 10 Year Treasury Yield: 1.62% (-0.07%)\r\nGold: $1,337 (+2.1%)\r\nUSD\/EUR: $1.123 (+0.6%)\r\n\r\nMajor Events: \r\n\u2022 Monday \u2013 The board of Illinois\u2019 defined contribution plans terminated all active mutual fund managers in favor of passive index investments.\r\n\u2022 Monday \u2013 Tesla\u2019s bid for SolarCity was hit by shareholder lawsuits which may delay the deal.\r\n\u2022 Tuesday \u2013 Microsoft announced a $40 billion stock buyback and raised its dividend by 8%.\r\n\u2022 Wednesday \u2013 The US agreed to allow Boeing and Airbus to sell airliners to Iran.\r\n\u2022 Wednesday \u2013 The Fed left interest rates unchanged at its September meeting, but hinted of a likely increase in December.\r\n\u2022 Friday \u2013 Oil prices fell on skepticism major producers will be able to agree of supply cuts at next week\u2019s meeting in Algeria.\r\n\u2022 Friday \u2013 Facebook acknowledged it had been reporting inflated numbers on how long users watched ad videos due to a calculation methodology.\r\n\u2022 Friday \u2013 Yahoo said hackers broke into its network in 2014 and stole personal data on over 500 million users.\r\n\u2022 Friday \u2013 Twitter shares rose 21% on talk of a possible acquisition by Salesforce or Alphabet.\r\n\r\nOur take:\r\n\r\nRecent market jitters stemmed from fears that central bank stimulus measures are losing their potency and\/or the banks are losing their desire to conduct more unorthodox policy. That was tested this week as the Fed and Bank of Japan each made announcements. Neither proved exciting or bold, but both remain generally accommodative, and markets reacted positively.\r\n\r\nThe Bank of Japan\u2019s approach was more interesting. They intend to keep their 10 year government bond near zero yield and let the long end go higher. This will help their financial institutions make money and encourage them to yield. Historically, the shape of the yield curve has been a very powerful predictor of recession. Lately it has gotten less attention than the sheer brute force of ultra-low rates, but it probably makes sense to pay attention to the shape as well.\r\n\r\nThere are a million opinions on what central banks should do and how effective their policies have been. We don\u2019t have a desire to add one more. But in the meantime we note that whatever they are doing continues to drive asset prices higher. That won\u2019t last forever, but it may last a lot longer than many people expect.