Clarksville Weekly Market Snapshot from Frazier Allen for the week of July 10th, 2016

Clarksville, TN – The economic data were mostly on the strong side of expectations. Nonfarm payrolls surprised sharply to the upside in June (+287,000), but that followed a very soft payroll figure for May (revised to +11,000).

The disappointing May number is now seen as an anomaly, but then so was the June figure. Large month-to-month swings in payrolls are unusual, but they do happen occasionally.

The three-month average payroll gain was +147,000, slower than in 1Q16 (+196,000) and 2015 (+221,000).

That slowdown may reflect greater caution in hiring (reflecting uncertainty about the Brexit vote, the presidential election, and the global economy), but it may also be due to tighter labor market conditions.

The unemployment rate rose to 4.9%, versus 4.7% in May and 5.0% in April, but this likely reflects noise in the data (the unemployment rate is reported accurate to ±0.2%).

In its Financial Stability Report, the Bank of England highlighted several channels through which the Brexit vote could increase risks to financial stability, including the funding of the U.K.’s large current account deficit, the commercial real estate market, high household debt, subdued global growth, and fragility in the functioning of financial markets.

Global anxieties pushed long-term interest rates down worldwide (to be clear, the drop in Treasury yields reflects this global flight to safety, not domestic economic weakness).

Next week, the important economic data bunch up on Friday. However, while the data reports will help to fill in the picture for 2Q16, market participants are likely to remain focused on the rest of the world. Policymakers at the Bank of England will meet on Thursday.

Recall that, prior to the Brexit vote, BOE Governor Mark Carney said the policy implications were unclear. The central bank would have to choose between fighting inflation and supporting economic growth. However, after the vote, Carney said that “some monetary policy easing will likely be required over the summer.” Investors may be disappointed if the BOE doesn’t pull the trigger.

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 June 30th, 2016.

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