Clarksville Weekly Market Snapshot from Frazier Allen for the week of January 11th, 2015

Clarksville, TN – The December Employment Report was strong, but with some conflicting details. Nonfarm payrolls rose by a greater-than-expected 252,000 (median forecast: +240,000), with a net revision to October and November of +50,000.

It was the strongest year for job growth since 1999 (and the strongest private-sector job growth since 1997). The unemployment rate fell to 5.6% (median forecast: 5.7%), with annual benchmark revisions making little difference – however, the drop in the unemployment rate was due entirely to a decrease in labor force participation (don’t read too much into that, seasonal adjustment is tricky in December).

Average hourly earnings fell 0.2% (median forecast: +0.2%), while November’s gain was revised to +0.2% (from +0.4%) – up 1.7% y/y (weak, but lower gasoline prices will help to push real earnings somewhat higher).

Stock market volatility continued, as investors tried to gauge the U.S. economic outlook and evaluate the risks from the rest of the world. The December Fed policy meeting minutes showed that officials believe they can be patient, but also noted that rates could be raised even if inflation is low (as long as there are strong expectations that it will move up to the Fed’s 2% goal).

Next week, the focus will be on the European Court of Justice ruling on the legality of European Central Bank bond purchases (the German Constitutional Court expressed serious concerns, but punted the case to the ECJ, which heard the case in October).

This ruling will be preliminary – hence, non-binding for the ECB. However, if sovereign bond purchases are deemed illegal, it would make it much more difficult for the ECB to embark on quantitative easing – that would be bad. So, global financial markets will hinge on the ruling.

Important Disclosures

Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Investing involves risk and investors may incur a profit or a loss.

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 January 8th, 2015.

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