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Authored by Axel Merk via MerkInvestments.com,

The Fed’s “balance sheet reduction” may have profound implications for the dollar, gold, stocks and bonds. We’ll provide an outlook...

It is said forecasts are difficult, especially when they relate to the future. Investors might want to pay attention nonetheless, not so much because I believe I have a crystal ball, but because investing is about managing risk. And there’s a risk that I’m right.

Quantitative Tightening

Heading into today's meeting with a smorgasbord of 'relatively' good data recently, Governor Poloz had the perfect excuse to raise rates (for the first time since 2010) and tamp down the firey bubble in home prices. Not a total surprise, given hawkish comments from BOC officials in recent weeks, but the Loonie is surging on the hike but CAD stocks (which were rallying into the decision) are limping lower.

Who could have seen this coming? US mortage applications tumbled 7.4% in the prior week - the biggest drop since 2016 - as mortgage rates rose to two-month highs following the Fed's rate-hike and hawkish jawboning.

The big driver was refis which fell 13% WoW and a stunning 57% year-over-year - the biggest plunge since the taper tantrum.

All data above adjusted for July 4th holiday.

Fed Chair Yellen will be testifying to the House Financial Services committee at 1000EDT, followed by testimony tomorrow before the Senate Banking Committee (the testimony for both events is likely to be identical, as it has on previous occasions), however her prepared remarks will be released 90 minutes earlier, at 8:30am. Courtesy of RanSquawk, here are the main things to look for in her prepared testimony as well the subsequent Q&A.

By Yra Harris from Notes From Underground

Brainard Delivers a Very Significant Speech