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Clarksville, TN – As expected, the European Central Bank (ECB) signaled that it would begin a quantitative easing program, purchasing €60 billion per month in public and private securities through September 2016.
The amount of monthly purchases was a bit higher than anticipated, but that included the ECB’s already-existing program to purchase asset-backed securities and covered bonds. The ECB’s announcement sent the euro sharply lower.The Bank of Canada surprised the markets, by cutting short-term interest rates. Canada faces a mixed reaction to lower oil prices, which will hurt energy producers in the West, but benefit energy users in the East. However, the net impact already appears to be negative.
Next week, global financial markets are expected to react to Greek election results (Sunday). The Fed policy meeting is expected to be uneventful – there is no Janet Yellen press conference and the wording of the policy statement is expected to be little changed. The advance estimate of GDP growth is always an adventure. Realistically, we could see the initial headline growth figure come in anywhere from +2.0% to +4.0%.
As a general theme, worries about the global situation are expected to keep market volatility at elevated levels in the near term. However, the fundamentals of the U.S. economy are generally improving. The drop in gasoline prices should provide a considerable benefit to consumers and small businesses through the first half of the year.
Consumer Money Rates
Treasury Yield Curve – 01/23/2015
S&P Sector Performance (YTD) – 01/23/2015
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 15th, 2015.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
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