Clarksville Weekly Market Snapshot from Frazier Allen for the week of August 25th, 2013

Clarksville, TN – Fed tapering concerns continued to dominate the stock market action. The minutes of the July 30th-31st Federal Open Market Committee meeting provided little clarification.

Officials noted that the unemployment rate had fallen “considerably” since last fall (when QE3 began), with “solid” gains in nonfarm payrolls in recent months, but other measures of labor force utilization suggested “more modest” improvement.

From the minutes: “A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases. At the same time, a few others pointed to the contingent plan that had been articulated on behalf of the Committee the previous month, and suggested that it might soon be time to slow somewhat the pace of purchases as outlined in that plan.”

A key paper presented at the Fed’s annual monetary policy symposium in Jackson Hole concluded that it was “imperative” that central banks outline a framework for the use of large-scale asset purchases: “without such a framework, investors do not know the conditions under which asset purchases will occur or will be unwound, which undercut the efficacy of policy targeted at long-term asset values.” Amen to that.

With no clear guidance from the Fed, investors looked to the economic data for signs of whether tapering should be delayed. No clear results here either. Existing home sales rose in July, while new home sales tanked. Jobless claims remained low. The Index of Leading Economic Indicators was consistent with moderate growth.

Next week, data reports will have some potential to move the markets, as investors try to pile up arguments for and against a delay in Fed tapering. A sharp drop in aircraft orders (following strength in May and June) should drive the headline durable goods figure sharply lower.

Consumer Confidence is likely to be little changed (note that while perceptions of current jobs available have grown less depressed, they are a long way from normal). The Pending Home Sales Index may provide some indication of whether higher mortgage rates are dampening the housing recovery (and in turn, overall economic growth).

The estimate of 2Q13 GDP growth is expected to be revised somewhat higher (reflecting a smaller-than-expected trade deficit).  Financial market activity may thin out ahead of the three-day weekend.  Investors will return from the Labor Day holiday with a clear focus on the August Employment Report, which is expected to play a key role in the Fed’s September 18 policy decision.

Indices

	Last	Last Week	YTD return %
DJIA	14963.74	15112.19	14.19%
NASDAQ	3638.71	3606.117	20.51%
S&P 500	1656.96	1661.32	16.18%
MSCI EAFE	1735.38	1756.62	8.19%
Russell 2000	1036.20	1027.61	22.00%

Consumer Money Rates

	Last	1-year ago
Prime Rate	3.25	3.25
Fed Funds	0.10	0.15
30-year mortgage	4.58	3.66

Currencies

	Last	1-year ago
Dollars per British Pound	1.559	1.579
Dollars per Euro	1.336	1.247
Japanese Yen per Dollar	98.510	79.190
Canadian Dollars per Dollar	1.052	0.994
Mexican Peso per Dollar	13.113	13.188

Commodities

	Last	1-year ago
Crude Oil	105.09	96.98
Gold	1371.93	1639.75

Bond Rates

	Last	1-month ago
2-year treasury	0.39	0.32
10-year treasury	2.89	2.56
10-year municipal (TEY)	4.85	4.49

Treasury Yield Curve – 08/23/2013

S&P Sector Performance (YTD) – 08/23/2013

Economic Calendar

August 26	—	Durable Goods Orders (July)
August 27	—	Case-Shiller Home Prices (June) Consumer Confidence (August)
August 28	—	Pending Home Sales Index (July)
August 29	—	Jobless Claims (week ending August 24) Real GDP (2Q13, 2nd estimate)
August 30	—	Personal Income and Spending (July) Chicago Purchasing Managers Index (August) Consumer Sentiment (August)
September 2	—	Labor Day Holiday (markets closed)
September 3	—	ISM Manufacturing Index (August)
September 6	—	Employment Report (August)
September 18	—	FOMC Policy Decision, Bernanke Press Briefing

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 August 15th, 2013.

©2013 Raymond James Financial Services, Inc. member FINRA / SIPC.