Clarksville, TN – The economic data reports of recent weeks contained a few surprises. Consumer spending growth in 3Q13 was stronger than previously estimated, while monthly figures showed acceleration in spending growth in the first two months of 4Q13 (although this is somewhat inconsistent with the pace of income growth).
Right now, inflation-adjusted consumer spending (70% of Gross Domestic Product) appears to be on track for about a 4% annual rate in 4Q13 – impressive, although the current figures may be revised. Durable goods orders rose more than expected in November, with the details suggesting that capital spending plans were delayed due to the government shutdown.The stock market finished 2013 on a strong note, but investors may be concerned about the pace of Fed tapering in 2014. The 10-year Treasury note yield has gravitated toward 3%, a level which Federal Reserve policymakers are likely comfortable with.
Long-term interest rates are expected to trend gradually higher over the course of 2014, but we should see some volatility around that trend (and the stock market ought to react accordingly).
Next week, the FOMC minutes may provide some clues regarding the expected pace of Fed tapering. However, the focus will be on Friday’s job market figures. Seasonal adjustment is often tricky in December. We normally shed jobs in construction, education, and leisure, but gain jobs in retail and package deliveries.
Seasonal job losses are likely to be somewhat less than normal, while seasonal job gains may be a bit stronger. Hence, we should see a relatively strong gain (+220,000 to +240,000) in adjusted payrolls. The unemployment rate is expected to hold steady at 7.0%, although the trend is lower.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Dollars per British Pound||1.644||1.623|
|Dollars per Euro||1.368||1.317|
|Japanese Yen per Dollar||104.850||87.100|
|Canadian Dollars per Dollar||1.064||0.987|
|Mexican Peso per Dollar||13.104||12.773|
|10-year municipal (TEY)||4.55||4.34|
Treasury Yield Curve – 01/03/2014
S&P Sector Performance (YTD) – 01/03/2014
|ISM Non-Manufacturing Index (December)|
|Trade Balance (November)|
|ADP Payroll Estimate (December)
FOMC Minutes (December 17-18)
|Jobless Claims (week ending January 4)|
|Employment Report (December)|
|Retail Sales (December)|
|Fed Beige Book|
|Building Permits, Housing Starts (December)
Industrial Production (December)
|MLK, Jr. Holiday (markets closed)|
|FOMC Policy Decision, no press briefing|
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 January 2nd, 2013.