Clarksville Weekly Market Snapshot from Frazier Allen for the week of January 4th, 2015

Clarksville, TN – Two days before Christmas, the government revised its estimate of 3Q14 GDP growth sharply higher (to 5.0%, vs. +3.9% in the 2nd estimate). Most of the revision was in consumer spending (a 3.2% annual rate, vs. +2.2%), which accounts for 70% of the economy.

Moreover, the monthly figures through November suggest an even stronger pace of consumer spending growth in 4Q14 (4.0% to 4.5%). It’s not hard to do the consumer spending calculation (and the monthly figures are subject to revision), but the markets seemed not to fully reflect the improved consumer outlook.

As we begin the year, investors remain nervous about global growth and the eventual tightening of monetary policy. Many U.S. firms will feel an impact from soft global growth and a stronger dollar (weaker earnings from abroad), and we should see a significant contraction in energy exploration and production.

However, lower oil prices will provide a net benefit to the economy as a whole. Consumer purchasing power is improving, which should help fuel strong spending gains in the first half of the year. The Fed’s decision to begin raising short-term interest rates will be data-dependent, but with inflation running low, officials can afford to be patient.

Next week, the focus will be on the December Employment Report. Note that seasonal adjustment can be tricky (as we normally lose a lot of jobs in construction and education) and some of December’s seasonal strength (retail, package delivery) may have been pulled forward into November.

The minutes of the December 16th-17th Open Market Committee are not expected to provide any new insight into the Fed’s timing decision, but there’s always a chance that the markets may take something out of context.

Important Disclosures

[320left]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.

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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 18th, 2014.

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