Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 13th, 2015

Clarksville, TN – The economic calendar was thin. The headline retail sales figures for November were not far from expectations, but core sales (which exclude autos, building materials and gasoline) were up 0.6% (stronger than anticipated). The Producer Price Index continued to reflect disinflation pressure, with falling prices within the pipeline.

Commodity prices fell further, led by a drop in oil (now below the critical $40.00 level). Anxieties about the decline in commodity prices fed through to the stock market, which fell broadly during the week and cast some doubt about the Fed’s ability to raise rates next week (still likely, but increased financial instability could lead to a delay).

The China Foreign Exchange Trade System, part of the country’s central bank, began issuing a new exchange rate index – the renminbi (RMB) vs. a basket of currencies. The move was, according to the CFETS, meant to shift the focus away from RMB/US$, and was widely interpreted as paving the way for currency devaluation – adding to worries about commodity prices.

Next week, the Federal Open Market Committee is widely expected to raise the target range for federal funds (to 0.25-0.50%). In its policy statement, the FOMC is expected to stress that 1) policy will still be accommodative, 2) future moves will be data-dependent and 3) economic conditions are expected to evolve in such a way as to warrant a gradual path of interest rate increases.

Fed officials will revise their projections of growth, unemployment and inflation, including a new dot plot. Fed Chair Yellen will explain it all in her post-meeting press conference. In a perfect world, the Fed results would lead to a collective yawn on Wednesday and we would all sit back and contemplate what’s for dinner. However, there are a lot of moving parts here and we could see some over-reaction in the global markets.

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 December 10th, 2015.

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