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Clarksville, TN – There are a few key financial market themes of the last several weeks. While the outlooks for the domestic economy and Federal Reserve policy are important, U.S. investors are sensitive to developments in the rest of the world.
Basically, poor economic news from the euro area, China, or Japan is a negative for U.S. equities, while any efforts by foreign central banks to address weakness are seen as a positive.
Japan posted a second quarterly decline in real GDP. Manufacturing gauges for the euro area and China were weak. The Bank of Japan extended its quantitative easing at the end of October.The People’s Bank of China surprised with an interest rate cut. The European Central Bank’s Mario Draghi has repeatedly suggested that QE (central bank purchases of sovereign debt) is on the way (ECB policymakers will meet on December 4th).
The mid-month economic data reports for the U.S. were a mixed bag. The Producer Price Index and Consumer Price Index were both a bit higher than anticipated, reflecting what appears to be one-time anomalies – but the underlying trends remain low. Industrial production showed varied results across industries in October.
Residential construction was mixed (but with strength in single-family activity). Existing home sales exceeded expectations, although up only meagerly from a year ago. The October index of Leading Economic Indicators suggested very little chance of entering a recession anytime soon.
Next week, the economic data reports pile up on Tuesday and Wednesday. The estimate of 3Q14 GDP growth is expected to be revised a bit lower (reflecting mixed revisions to the component data). The reports on new home sales and durable goods are often erratic and any surprises could be exaggerated by thin market conditions ahead of the holiday. Financial markets will close early on Friday.
Consumer Money Rates
Treasury Yield Curve – 11/21/2014
S&P Sector Performance (YTD) – 11/21/2014
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 November 20th, 2014.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
TopicsBonds, British Pound, China, Clarksville, Clarksville TN, Crude Oil, DJIA, Euro, Europe, F&M Investment Services, Fed, Gas Prices, GDP, gold, holiday shopping, Inflation, Japan, Japanese Yen, Mexican Peso, MSCI EAFE, Nasdaq, Oil Prices, Raymond James Investment Services, Russell 2000, S&P 500, U.S. Stock Market, Weekly Market Snapshot
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