Clarksville Weekly Market Snapshot from Frazier Allen for the week of August 4th, 2013
August 4, 2013
Clarksville, TN – The Federal Open Market Committee left short-term interest rates unchanged, as expected, and did not alter its forward guidance (on short-term interest rates) or the monthly pace of asset purchases.
In the policy statement, the FOMC noted that growth had been “modest” in the first half of the year, that mortgage rates had risen “somewhat,” and that a persistent low trend in inflation could present some risks for the economy. All of which suggests that a tapering in the rate of asset purchases will be delayed. However, investors should still expect some tapering by the end of the year. [Read more]
Markets gain ground, await further Fed guidance
August 3, 2013
Clarksville, TN – July was certainly eventful in terms of market movements and economic news. Stocks were up for the month, with the S&P 500 posting its biggest monthly gain since January, making up for its decline in June.
All the major indices ended July in higher territory after housing prices posted their largest gain in seven years and the Commerce Department reported that advanced estimates show that gross domestic product grew more than forecast in the second quarter. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of July 30th, 2013
July 30, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data reports were mixed. Existing home sales fell slightly in July. New home sales jumped 8.3% (although figures for the two previous months were revised lower and the July increase was not statistically different from zero). A measure of manufacturing activity in China weakened in July, but the same measure for the euro area was about flat.
Next week, no changes are expected from the Federal Open Market Committee, but investors will be sensitive to any changes in the wording of the policy statement. Future Fed policy decisions will be driven by the economic data (or more precisely, the implications that the data will have for the economic outlook). [Read more]
Weekly Market Snapshot from Frazier Allen for the week of July 24th, 2013
July 24, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
In 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 more]
Weekly Market Snapshot from Frazier Allen for the week of July 16th, 2013
July 16, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Fed 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 more]
Weekly Market Snapshot from Frazier Allen for the week of July 7th, 2013
July 7, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The 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 more]
Weekly Market Snapshot from Frazier Allen for the week of June 30th, 2013
June 30, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Federal 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 more]
Weekly Market Snapshot from Frazier Allen for the week of June 25th, 2013
June 25, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The 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 more]
Weekly Market Snapshot from Frazier Allen for the week of June 16th, 2013
June 16, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
U.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 more]
Weekly Market Snapshot from Frazier Allen for the week of June 11th, 2013
June 11, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Next 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 more]
