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Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The Federal Open Market Committee left short-term interest rates unchanged and retained its conditional commitment to keep rates low for “an extended period.” The FOMC also repeated that its $600 billion asset purchase program will be completed by the end of this month. The FOMC noted that the economic recovery is continuing, but “somewhat more slowly” than had been expected. The slower pace of the recovery “reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan.”
In his post-FOMC press briefing, Fed Chairman Bernanke said that while Fed policymakers expects growth to pick up into 2012, “we don’t have a precise read on why this slower pace of growth is persisting.” The FOMC lower its expectations of GDP growth for this year (2.7%-2.9%) and next (3.3%-3.7%). The FOMC expects that the unemployment rate will to continue to decline, “but the pace of progress remains frustratingly slow.”
The economic data reports were consistent with the view of slower economic growth in the near term, but not a contraction. The announcement by the U.S. and others to tap into petroleum reserves helped push oil prices down further (which, if sustained, should help consumer spending growth in the second half of the year).
With an increased level of uncertainty in the economic outlook, investors will be eager for timely data – and there will be some important economic releases in the next two weeks. Personal income and spending figures will help fill in the GDP picture for the second quarter. Consumer confidence figures should provide some insight into the state of the household sector. The ISM manufacturing data will be a key component of the near-term outlook for the factory sector. A week from Friday, the June Employment Report arrives.
Consumer Money Rates
Treasury Yield Curve – 6/24/2011
S&P Sector Performance (YTD) – 6/24/2011
Treasury Yield Curve – 6/17/2011
S&P Sector Performance (YTD) – 6/17/2011
Treasury Yield Curve – 6/10/2011
S&P Sector Performance (YTD) – 6/10/2011
Treasury Yield Curve – 5/27/2011
S&P Sector Performance (YTD) – 5/27/2011
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.
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 June 23rd, 2011.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
TopicsCapacity Utilization, Consumer Price Index, Economic Data, European Debt, Federal Open Market Committee, Financial Markets, Frazier Allen, Global Equity Markets, Gross Domestic Product, Index of Leading Economic Indicators, Manufacturing Output, Raymond James, Raymond James Investment Services, Scott J. Brown, Seasonal Adjustment, Short-Term Interest Rates, Volatility, Weekly Market Snapshot
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