Clarksville Weekly Market Snapshot from Frazier Allen for the week of August 16th, 2015

Clarksville, TN – China’s leadership wants the yuan to become an important reserve currency, but that means that the country would have to let the currency float freely and be set by market forces. The People’s Bank of China, the country’s central bank, decided to alter its exchange rate regime.

The currency is allowed to trade in a 2% band around a level announced before the markets open. The PBOC said that this base level would simply be set at the previous session’s close (rather than taken out of the air).

Traders took the currency down 1.9% on Tuesday. It fell further on Wednesday, before the PBOC apparently decided it had had enough of the free market, intervened, and that the forex adjustment was “basically completed.”

Confusion about China’s intentions generated volatility in the global markets, sending U.S. share prices sharply lower. Bond yields dropped. Crude oil prices continued to fall, reflecting concerns about the pace of global economic growth.

The U.S. economic data were mixed. Retail sales rose a bit more than expected in July, but with upward revisions to May and June (suggesting a likely upward revision to second quarter GDP growth). Industrial production was stronger than anticipated in July, but improvement was concentrated in autos.

While auto production is no doubt strong, seasonal adjustment almost certainly exaggerated the increase in July. Excluding autos, factory output edged up 0.1%, a meager 0.8% increase from a year ago. Reports on import prices and producer prices continued to show disinflation pressures.

Next week, the focus will be on the FOMC minutes from the July 28th-29th policy meeting. The minutes should shed some light into the Fed’s decision-making process and illustrate the range of views regarding the timing and pace of policy tightening. There is some chance that the financial markets will take something out of context.

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 13th, 2015.

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