Clarksville, TN – The stock market’s anxieties about oil prices, the Fed, and the rest of the world gave way to a renewed sense of optimism (or at least less pessimism).
Heading into the Federal Open Market Committee meeting, the key question was whether it would abandon the “considerable time” phrase. The FOMC had it both ways, removing the phrase, saying instead that it could “be patient” in deciding when to begin normalizing policy, but quickly adding that the intent is exactly the same.
The dots in the dot plot, Fed officials’ projections of the appropriate federal funds rate at the end of each of the next few years, were still all over the place, but the 2015 dots may be starting to split into two camps: one that wants to begin raising rates a little sooner (March, April), the other a little later (July, September, October).Fed Chair Janet Yellen continued to emphasize that future policy decision will be data dependent and downplayed the “transitory” impact of lower oil prices. Still, the body language suggested that officials will be cautious.
Yellen dispelled two popular misconceptions. One was that the Fed can begin tightening at any meeting, not just those with scheduled press briefing (March, June, September). The other was that people shouldn’t assume that the Fed will move in measured steps (25 basis points per policy meeting) when tightening begins.
Next week, the financial markets should be in holiday mode. The reports on home sales and durable goods orders are often volatile and the markets could overreact to a surprise, but it should be a relatively dull week.
Indices
Last | Last Week | YTD return % | |
DJIA | 17356.87 | 17533.15 | 4.71% |
NASDAQ | 4644.31 | 4684.03 | 11.20% |
S&P 500 | 2012.89 | 2026.14 | 8.90% |
MSCI EAFE | 1740.95 | 1797.34 | -9.12% |
Russell 2000 | 1174.83 | 1161.87 | 0.96% |
Consumer Money Rates
Last | 1 year ago | |
Prime Rate | 3.25 | 3.25 |
Fed Funds | 0.13 | 0.08 |
30-year mortgage | 3.80 | 4.47 |
Currencies
Last | 1 year ago | |
Dollars per British Pound | 1.571 | 1.630 |
Dollars per Euro | 1.245 | 1.377 |
Japanese Yen per Dollar | 117.190 | 102.960 |
Canadian Dollars per Dollar | 1.166 | 1.058 |
Mexican Peso per Dollar | 14.791 | 12.950 |
Commodities
Last | 1 year ago | |
Crude Oil | 56.47 | 97.22 |
Gold | 1197.54 | 1237.33 |
Bond Rates
Last | 1 month ago | |
2-year treasury | 0.63 | 0.51 |
10-year treasury | 2.19 | 2.33 |
10-year municipal (TEY) | 3.22 | 3.56 |
Treasury Yield Curve – 12/19/2014
S&P Sector Performance (YTD) – 12/19/2014
Economic Calendar
December 22nd | — | Existing Home Sales (November) |
December 23rd | — | Real GDP (3Q14, 3rd estimate) Durable Goods Orders (November) UM Consumer Sentiment (December) Personal Income and Spending (November) New Home Sales (November) |
December 24th | — | Initial Claims (week ending December 20th) |
December 25th | — | Christmas Holiday (markets closed) |
December 30th | — | Consumer Confidence (December) |
January 1st | — | New Year’s Day (markets closed) |
January 2nd | — | ISM Manufacturing Index (December) |
January 7th | — | FOMC Minutes (December 16th-17th) |
Important Disclosures
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
Material prepared by Raymond James for use by its financial advisors.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business December 18th, 2014.