Clarksville Weekly Market Snapshot from Frazier Allen for the week of August 20th, 2013
August 20, 2013
Clarksville, TN – Fed tapering concerns continued to weigh against the stock market and helped push long-term interest rate higher. There’s a growing consensus that we will see some reduction in the rate of asset purchases announced next month, but the first move may be a small one, as a compromise among divided Fed officials and as a means of testing market reactions to tapering.
The market reaction to the tapering talk is still a puzzle. Tapering is not tightening and the Fed will continue to support the recovery through its guidance on short-term interest rates. However, long-term interest rates are normally going to rise as an economic recovery progresses.
Frazier Allen
Clarksville Weekly Market Snapshot from Frazier Allen for the week of August 12th, 2013
August 12, 2013
Clarksville, TN – Next week, the mid-month economic data will help fill in the picture of where the economy stands in the third quarter.
Many of the reports have market-moving potential, but future Fed policy decisions are seen as being driven more by the employment figures.
Frazier Allen
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]
Weekly Market Snapshot from Frazier Allen for the week of February 3rd, 2013
February 3, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
With so many economic reports, some surprises were likely. Real GDP fell at a 0.1% annual rate in the advance estimate for 4Q12, smacked down by slower inventory growth and a 22.2% drop in defense spending (otherwise, GDP would have risen 2.5%). Consumer spending rose at a 2.2% pace in 4Q12, while business fixed investment advanced 8.4%. Residential construction added 0.4 percentage points to GDP. Exports fell.
Consumer Confidence tanked in January, while the Consumer Sentiment Index improved. The ISM Manufacturing Index was stronger than anticipated. Personal income jumped 2.6%, reflecting a 34.3% spike in dividend income and earlier bonus payments. Spending rose 0.2%. The PCE Price Index was flat overall (+1.3%) and ex-food and energy (+1.4% y/y) – trending well below the Fed’s 2% goal. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of January 30th, 2013
January 30, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The House voted to delay the need for a debt ceiling increase by three months, to May 19. Congress has not had a real budget since 2009, funding the government through a series of stopgap measures (Continuing Resolutions). This week, Congress set a goal to have a real budget by April 15th, or lawmakers won’t get paid. Actually, they’ll still get paid eventually.
Oh, and the House and Senate only have to come up with a budget that can be approved by one chamber. They don’t have to have a set of budget bills that can be approved by both chambers (that is, something that could be sent to the president and signed into law). Spending cuts are still slated to kick in on March 1st, with about half of that in defense. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of January 20th, 2013
January 20, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed, but generally consistent with moderate growth in the near term. Retail sales and industrial production were largely in line with expectations. Jobless claims sank and housing starts jumped, boosting the major stock market indices, although seasonal adjustment likely played a part. The Fed’s two major regional surveys disappointed, reflecting contractions in new orders and employment and some pickup in input price pressures.
Earnings reports were mixed, but investors seemed more concerned with the path ahead. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of January 13th, 2013
January 13, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic calendar was thin. Jobless claims continued to trend at a moderately low level. The trade deficit widened unexpectedly in November. As a result, net exports are likely to subtract from 4Q12 GDP growth.
With little economic data, the stock market began to focus on earnings reports. President Obama nominated Jack Lew to succeed Timothy Geithner as treasury secretary. The move likely signals an emphasis on upcoming battles. Lew currently serves as Obama’s chief of staff. He also ran the Office of Management and Budget for both Clinton and Obama. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of January 6th, 2013
January 6, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
On New Year’s Day (technically, the December 31 legislative workday), Congress approved the Senate’s plan to lessen the impact of the fiscal cliff. The American Tax Relief Act (ATRA) raises taxes for upper income households. The passage of the plan removes a major uncertainty for the financial markets. That is, we now know what tax rates are going to be.
However, there were a number of problems with the plan. Congress failed to prevent (or offset) a two percentage point increase in payroll taxes, which should dampen consumer spending growth in the near term. The bill postponed large spending cuts by two months, did little to reduce the long-term budget shortfall, and did not address the federal debt ceiling. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of December 23rd, 2012
December 23, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Stock market participants were encouraged by progress (over the weekend) in fiscal cliff negotiations. However, the two sides remained far apart and discussions stalled on Tuesday. House Speaker Boehner proposed a plan B, which would raise taxes on those making more than $1 million per year. However, the plan faced opposition from Senate Democrats, a threat of a presidential veto, and rejection from some of the more conservative members of the House.
Lacking enough votes within his own party, Boehner pulled the plan on Thursday evening. The result was an even greater bargaining advantage for the Democrats and a near certainty of going over the cliff. There’s still a strong belief that a deal will be reached in January or early February, but negotiations may have to start over with the new Congress. Post-cliff, however, Republicans would be able to vote for tax cuts rather than tax increases. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of December 17th, 2012
December 17, 2012
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
As expected, the Federal Open Market Committee decided to fold purchases of $45 billion per month in long-term Treasuries into QE3 when Operation Twist ends later this year (in Operation twist, the Fed is buying $45 billion per month in long-term Treasuries and selling a similar amount of shorter-term Treasuries out of its portfolio). Thus, the Fed will continue buying $85 billion in long-term assets in 2013 ($45 billion in Treasuries, $40 billion in mortgage-backed securities), with no specified ending date, until there is “substantial improvement” in labor market conditions.
The Fed also shifted the language in its forward guidance on the overnight lending rate from dates to economic thresholds. Specifically, the Fed “currently anticipates that the exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2% longer-run goal, and longer-term inflation expectations continue to be well anchored.” [Read more]
