Clarksville Weekly Market Snapshot from Frazier Allen for the week of March 15th, 2015

Clarksville, TN – Retail sales results for February continued to disappoint and consumer sentiment slipped unexpectedly, but weather may have been a factor. The reports on import prices and producer prices both showed significant disinflationary pressure (which may be seen as delaying the Fed’s initial hike in short-term interest rates). Stock market volatility was elevated, with sharp moves day by day.

Market participants have grown increasingly worried about exchange rates. Around the world, exchange rates mostly fall under the jurisdiction of finance ministers (the Treasury in the U.S.), not the central banks.

However, monetary policymakers have to be aware of the impact of currency movements on the outlooks for growth and inflation. The level of the exchange rate is usually not of much concern. It’s the speed of adjustment that matters. Sharp currency moves tend to destabilize trade activity and international finance.

There’s not much finance ministers can do to stem the tide, but verbal comments can help prevent exchange rates from moving too rapidly. For the U.S., the strong dollar has helped push commodity prices lower, but it’s a big negative for exporters.

Next week, the focus will be squarely on the Fed, but the end result should not be a surprise. The “patient” language will likely be taken out of the monetary policy statement, but as Chair Janet Yellen testified last month, that doesn’t mean the Fed will necessarily begin to raise short-term interest rates “in a couple of meetings.”

The Summary of Economic Projections should show a bit less dispersion in the dot plot but no clear consensus on the future path of the federal funds target. In her post-meeting press conference, Yellen will likely repeat the key concepts she shared in last month’s congressional testimony.

Future policy moves will depend primarily on the job market outlook. However, officials must be “reasonably confident” that inflation (1.3% y/y in January) will move toward the 2% goal.

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 March 12th, 2015.

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