Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Frazier Allen's Articles:
Clarksville, TN – What a week. Concerns about the downside risks to Europe and the rest of the world pushed global equity markets down and the U.S. followed. The economic data mattered little for the most part, but disappointing retail sales figures added to the drop in U.S. stocks on Wednesday.
Yields on long-term Treasuries sank sharply. Following a few days of elevated volatility, the financial markets appeared to settle down on Friday.
Clarksville, TN – The two weeks of trading this month took investors on a wild ride. The Dow Jones Industrial Average, for example, posted its biggest point gain and loss back to back for the first time since 1997, according to the Wall Street Journal
Last Tuesday’s 273-point “Dow Dive” was reversed by Wednesday’s 275-point “Dow Wow.” But then the Dow slumped again, dropping 335 points on Thursday.
Clarksville, TN – September reinforced its reputation as one of the worst months for stocks. The S&P 500, for example, dropped 1.5%. Thankfully, the declines over the past two weeks weren’t enough to entirely erase the gains we have seen over the past quarter.
In fact, the broad-market index, which reached a record high on September 18th, just managed to post its seventh straight quarterly gain.
Clarksville, TN – The economic data were mixed. The estimate of second quarter gross domestic product (GDP) growth was revised upward from 4.2% to 4.6%, as expected.
Existing home sales fell in August, reflecting a decline in speculators (i.e., fewer all-cash transactions). New home sales surged 18.9%, but that likely reflects the usual volatility in the data.
Durable goods orders fell 18%, reflecting an unwinding of July’s sharp spike in civilian aircraft orders. The three-month averages of shipments and orders for nondefense capital goods (ex-aircraft) suggest good strength in business fixed investments.
Clarksville, TN – The economic data calendar was thin. Retail sales rose as expected in August. However, the figures for June and July were revised higher.
While the pace of consumer spending growth does not appear to be especially strong into 3Q14, it’s not terrible weak either (and certainly not as bad as the data suggested a month ago). Financial market participants didn’t seem to care much about the retail sales data.
Global anxieties receded a bit as the “no” vote for Scottish independence regained an upper hand in the polls. The markets didn’t react much to President Obama’s call for military action in the Middle East.
Clarksville, TN – The economic data were mixed. ISM surveys were stronger than expected. Unit auto sales rocketed to a 17.4 million seasonally adjusted annual rate, the strongest pace since January 2006.
The Fed’s Beige Book, the summary of anecdotal economic information from the 12 Federal Reserve districts, was essentially more of the same (growth described as “modest to moderate”). The August Employment Report was disappointing.
Clarksville, TN – Market participants had expected Fed Chair Janet Yellen to adopt a decidedly “dovish” tone in her Jackson Hole speech.
However, Yellen presented a balanced assessment of the evidence and theories of labor market slack. While Yellen still sees plenty of labor market slack currently, she left the monetary policy outlook as an open question.
She repeated the notion (also included in the FOMC minutes) that the Fed could firm monetary policy sooner if the economy strengthens more than anticipated, but could also tighten more slowly if the economy disappoints.
Clarksville, TN – Retail sales were flat in July, reflecting a weak start to 3Q14. Industrial production rose 0.4%, restrained by lower output of utilities (cooler than normal temperatures). Manufacturing output rose 1.1%, reflecting a 10.1% jump in auto production.
However, seasonal adjustment in autos is tricky in July (prior to seasonal adjustment, auto production fell 18.0%, vs. -26.8% in July 2013). Seasonal plant closings were much more moderate this year, trimming weekly jobless claims as well. The Job Opening and Labor Market Turnover Survey data for June showed gradual improvement in hiring and quit rates (although both remain well below normal levels).
Clarksville, TN – The few economic releases were generally positive and reports on corporate earnings were mostly on the high side of expectations, but the stock market seemed to pay little attention. Geopolitical tensions (Russia/Ukraine, Iraq, Israel/Hamas) and the ongoing Fed policy debate set market participants on edge.
Geopolitical concerns helped push global bond yields sharply lower. The U.S. Treasury note yield fell below 2.40%.
Clarksville, TN – As was widely anticipated, the Federal Open Market Committee tapered another $10 billion from the monthly pace of asset purchases (now at $25 billion, with the program on track to be completed at the end of October).
The Fed provided no additional guidance on short-term interest rates, but repeated that the federal funds rate target would likely remain exceptionally low for “a considerable period” after the asset purchase program ends and that economic conditions will likely warrant a below-normal federal funds rate even as the Fed nears its employment and inflation goals.
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