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Clarksville Weekly Market Snapshot from Frazier Allen for the week of September 21st, 2014

 

F&M Investment Services - Raymond James - Clarksville, TNClarksville, TN – Fed policymakers reduced the monthly pace of asset purchases (QE3) by another $10 billion, to $15 billion, on track to finish buying at the end of October. The Fed repeated that “it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends.”

Fed officials’ projections of the appropriate year-end federal funds target rate indicated that most expect to begin raising short-term interest rates sometime in 2015, but there was a wide range in the individual forecasts (and implicitly, in their expectations of when rates will start to rise – with most spread roughly evenly between March and September).

Frazier Allen

Frazier Allen

Expectations of the appropriate federal funds rate for late 2016 were even more dispersed. This wide range of forecasts reflects different expectations for growth and inflation, but mostly a wide dispersion in estimate of the amount of slack in the economy, and the labor market in particular.

The economic data were generally on the weak side of expectations. Industrial production fell in August, but reflected a seasonal adjustment quirk in autos (positive, but mixed, and generally lackluster otherwise). Residential construction figures disappointed, but the data for the multi-family sector are erratic.

The Consumer Price Index fell 0.2% (+1.7% y/y), unchanged excluding food & energy (+1.7% y/y and a 1.8% annual rate for the first eight months of 2014). The Producer Price Report showed a general absence of inflation pressures within the pipeline.

As expected, Scotland voted to remain part of the United Kingdom. The margin of victory was higher than polls had suggested.

Next week, the economic data could generate some reactions in the financial markets (if sufficiently far from expectations), but the reports aren’t going to alter the bigger economic picture. Existing home sales are likely to have risen slightly in August. The reports on new home sales and durable goods orders are choppy and unreliable.

Orders are expected to have fallen sharply in August, reflecting a pullback from the July spike in aircraft. The estimate of 2Q14 GDP growth is expected to be revised higher, but combined with the weak 1Q14, still will average out to a lackluster result for the first half of the year. Data for the following week, including the September Employment Report, will be much more important.

Indices

Last Last Week YTD return %
DJIA 17265.99 17049.00 4.16%
NASDAQ 4593.43 4591.81 9.98%
S&P 500 2011.36 1997.45 8.82%
MSCI EAFE 1903.37 1903.85 -0.64%
Russell 2000 1159.27 1172.34 -0.37%

 Consumer Money Rates

Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.09 0.09
30-year mortgage 4.23 4.50

 Currencies

Last 1-year ago
Dollars per British Pound 1.634 1.597
Dollars per Euro 1.288 1.335
Japanese Yen per Dollar 108.680 98.940
Canadian Dollars per Dollar 1.098 1.030
Mexican Peso per Dollar 13.219 12.934

 Commodities

Last 1-year ago
Crude Oil 93.07 108.07
Gold 1223.84 1300.41

 Bond Rates

Last 1-month ago
2-year treasury 0.57 0.47
10-year treasury 2.60 2.40
10-year municipal (TEY) 3.49 3.37

 Treasury Yield Curve – 9/19/2014

 Treasury Yield Curve – 9/19/2014

S&P Sector Performance (YTD) – 9/19/2014

S&P Sector Performance (YTD) – 9/19/2014

Economic Calendar

September 22nd Existing Home Sales (August)
September 24th New Home Sales (August)
September 25th Jobless Claims (week ending September 20th)
Durable Goods Orders (August)
September 26th Real GDP (2Q14, 3rd estimate)
UM Consumer Sentiment (September)
October 1st ISM Manufacturing Index (September)
October 3rd Employment Report (September)
October 29th FOMC Policy Decision (no press conference)

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 September 18th, 2014.

©2014 Raymond James Financial Services, Inc. member FINRA / SIPC.


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