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Weekly Market Snapshot from Frazier Allen for the week of July 24th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesIn his monetary policy testimony to Congress, Fed Chairman Bernanke said that “a highly accommodative monetary policy will remain appropriate for the foreseeable future.” He indicated that the Fed is using asset purchases “primarily to increase the near-term momentum of the economy, with the specific goal of achieving a substantial improvement in the outlook for the labor market.”

The Fed will rely on its forward guidance that short-term interest rates will continue to remain exceptionally low “to help maintain a high degree of monetary accommodation for an extended period after asset purchases end, even as the economic recovery strengthens and unemployment declines toward more normal levels.” «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of July 16th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesFed Chairman Bernanke said nothing new, but the markets interpreted his comments as “dovish.” In Q&A following a speech on the history of the Fed, Bernanke said that given the high level of joblessness and low inflation, “you can only conclude that a highly accommodative monetary policy is needed.”

He also conceded that “there is some prospective gradual change in the mix of instruments, but that shouldn’t be confused with the overall thrust of policy, which is highly accommodative.” That’s consistent with the Fed beginning to lower the rate of asset purchases later this year and maintaining low short-term interest rates for a long time (well into 2015).

The June 18th-19th FOMC minutes showed that “many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases.” However, “several members judged that a reduction in asset purchases would likely soon be warranted.” «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of July 7th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesThe economic data were mixed. The June ISM non-manufacturing survey disappointed, but motor vehicle sales were strong and the employment report was better than anticipated. Nonfarm payrolls rose by 195,000 in June (the median forecast was 165,000), while figures for April and May were revised a net 70,000 higher.

Manufacturing payrolls continued to slide, but there were strong gains in business and professional services, as well as retail and leisure and hospitality. Payroll gains at eating and drinking establishments were strong for a third consecutive month (accounting for a little over a quarter of private-sector job gains in 2Q13).

The unemployment rate held steady at 7.6% (labor force participation edged higher). Long-term unemployment fell, but remained elevated. Unemployment rates for teenagers and young adults remain high. «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of June 30th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesFederal Reserve officials were out in force trying to soothe market fears. A range of Fed comments had added to market uncertainty in previous weeks, but officials are now singing out of the same page of the hymnal. The message: there was no change in the Fed’s monetary policy intentions last week.

Bernanke was merely clarifying the Fed’s decision-making process. Future policy moves will remain data-dependent. If the economic data come in weaker than anticipated, any reduction in the pace of the Fed’s asset purchases would be pushed out. Tapering is not tightening.

As the Fed slows the rate of asset purchases, it would still be added accommodation. The Fed expects to hold these securities for a long time, maintaining policy accommodation. A rise in the federal funds rate target is still a long way off. Most Fed officials expect the first increase in 2015. Equities rose and bond yields declined. «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of June 25th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesThe Federal Open Market Committee left short-term interest rates unchanged, did not alter its forward guidance on the overnight lending rate, and said it would maintain its asset purchase program at $85 billion per month. The policy statement was a near photocopy of the previous one.

The FOMC indicated that recent inflation readings have been low due partly to “transitory influences.” The downside risks to the outlook for growth and the labor market had “diminished” since the fall. The FOMC repeated that it could “increase or reduce” the pace of asset purchases depending on how the outlook for the labor market or inflation changes. «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of June 16th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesU.S. market participants continued to fret about Federal Reserve policy, debating when policymakers would dial down the rate of asset purchases and what that would mean for the economy and long-term interest rates. The market volatility surrounding the Fed’s decision is somewhat puzzling.

Recall that the Fed has a qualitative threshold for the asset purchase program: “substantial improvement” in labor market conditions. That phrase means different things to different Fed officials. The total level of Fed purchases is what matters, not the monthly pace. There was no appreciable increase in long-term interest rates when QE1 and QE2 ended. QE3 differs in that it is open-ended. We don’t know exactly when it will end and what the total amount of purchases will be. So, the total amount of Fed purchases is unclear. «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of June 11th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesNext week, the important economic data bunch up at the end of the week. Retail sales are likely to have been lackluster-to-moderate in May.

Industrial production figures should remain soft, reflecting general weakness in the manufacturing sector.

None of the reports is expected to suggest a removal of monetary policy accommodation anytime soon. «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of June 4th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesThe economic data were mixed, but generally better than expected.  Home prices continued to advance.  Consumer confidence improved. The estimate of first quarter GDP growth was revised lower (a 2.4% annual rate, vs. +2.5% in the advance estimate), but consumer spending and business fixed investment were both revised a bit higher. Personal income was flat in April (the Employment Report had shown a decrease in hours offsetting the impact of more jobs).

Personal spending fell 0.2%, partly reflecting lower gasoline prices and more normal temperatures (lower household energy consumption). Ex-energy, spending would have risen about 0.3%. Inflation-adjusted consumer spending (70% of GDP) edged up 0.1% – it’s only one month (and subject to revision), but spending appears to be on track for about a 2% annual rate in 2Q13 (vs. +3.4% in 1Q13). «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of May 26th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesThe financial markets were confused by the April 30th – May 1st FOMC minutes, which noted that “a number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth.”

That’s not a majority view. In his testimony before the Joint Economic Committee, Fed Chairman Bernanke gave a balanced assessment but strongly suggested that monetary policy would unlikely be changed anytime soon. Bernanke told Congress that it was doing fiscal policy wrong, significantly restraining the pace of recovery in the near term, while doing little to address the long-term problems in the budget outlook. Stocks sold off sharply following the FOMC minutes, but recovered. «Read the rest of this article»

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Weekly Market Snapshot from Frazier Allen for the week of May 19th, 2013

 

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment ServicesThe economic data reports were expected to be a series of tough hurdles for the stock market, but they ended up more like minor speed bumps. Share prices continued to rally broadly. The bond market was volatile, as investors debated when the Fed may begin to taper its asset purchases.

Retail sales results for April were better than anticipated – not strong, but not as bad as feared. Industrial production was weaker than expected. Residential construction figures were mixed, reflecting a high degree of volatility in the multi-family sector and continued strength in single-family homebuilding. «Read the rest of this article»

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