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Clarksville, TN – Italy voted “no” on its constitutional referendum and Prime Minister Renzi resigned. South Korea’s president was impeached. The European Central Bank extended its asset purchase program to the end of 2017, but will reduce the monthly pace of purchases in April.
None of that disturbed U.S. equity market investors who continued to enjoy the Trump sizzle. After showing some signs of stability, bond yields again moved higher.The economic calendar was thin. The ISM Non-Manufacturing Index rose more than expected in November, making up for ground that was lost in October.
The trade deficit widened in October, reflecting a pullback in agricultural exports, which had surged in 3Q16 (adding about a full percentage point to the headline GDP growth estimate).
Next week, there is a lot of economic data, but the focus will be on the Fed. The Federal Open Market Committee is widely expected to raise the federal funds target range to 0.50-0.75% (from 0.25-0.50%), while the board of governors should approve an increase in the primary credit rate (often still called the discount rate) to 1.25% (from 1%).
Officials are expected to indicate that, while future policy moves will remain data-dependent, rate increases are likely to be gradual. Quarter after quarter, the dots in the dot plot (senior Fed officials’ projections of the appropriate year-end federal funds target rate) have drifted lower.
However, that pattern may end, as the dots are likely to be little change relative to the September plot. In her post-meeting press conference, Chair Yellen is expected to be asked about the Fed’s likely response to fiscal stimulus from the new administration and Congress (she recently testified that the Fed will not try to anticipate, but will react to how any spending and tax changes will influence the economic outlook).
Consumer Money Rates
Treasury Yield Curve – 12/09/2016
As of close of business 12/08/2016
S&P Sector Performance (YTD) – 12/09/2016
As of close of business 12/08/2016
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 December 8th, 2016.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
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