The Weekly Market Snapshot from Frazier Allen for the week of August 28th
August 28, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
In his speech at the Kansas City Fed’s annual monetary policy symposium in Jackson Hole, Fed Chairman Bernanke said that “the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” adding that “we discussed the relative merits and costs of such tools at our August meeting.” Bernanke said that Fed policymakers “will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion.” He also noted that Fed officials expect inflation to “settle” over coming quarters at levels at below 2% (the upper end of the Fed’s comfort range. This inflation outlook, along with expectations of continued excess capacity, allowed the Federal Open Market Committee (on August 9) to make explicit the time frame (through the middle of 2013) that short-term interest rates are expected to remain exceptionally low. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of August 21st
August 21, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
Fear remained a significant factor in the financial markets, as concerns about weaker economic growth and worries that Europe’s sovereign debt crisis may be morphing into a fully-fledged banking crisis (with some implications for the U.S.) helped send long-term Treasury yields to record lows (the 10-year note traded briefly below 2%).
The economic data were mixed, but consistent with a lackluster-to-moderate pace of growth in the overall economy, not a recession. Industrial production rose 0.9% (more than expected), boosted by hot weather (increased output of utilities) and a rebound in autos – otherwise, manufacturing output rose 0.3%. Residential construction activity was soft. Existing home sales disappointed (the National Association of Realtors cited problems in the appraisal process and difficulties in obtaining financing). Consumer price inflation rose more than expected, boosted by the seasonal adjustment (which inflated gasoline prices) and higher apparel costs (three large increases in a row). Owner’s equivalent rent (which accounts for about a quarter of the overall CPI and a third of the core CPI) rose 0.3% (as a point of comparison, OER rose 0.3% over the 12 months ending December 2010). [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of August 14th
August 14, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
Acting after Standard and Poor’s decision to downgrade U.S. debt and a subsequent 635-point drop in the Dow Industrials on Monday, August 8th, the Federal Reserve announced on Tuesday the 9th that it was freezing short-term interest rates for at least two years. The Fed also said it was discussing a “range of policy tools” that it was “prepared to employ,” which some investors interpreted as meaning additional monetary stimulus might be forthcoming if the economy remains weak.
Yields on short-term Treasury debt fell after the Fed announcement, with two-year notes offering just 17 basis points and yields on the benchmark 10-year Treasury notes dropping to levels last seen during the 2008 financial crisis. Noting that economic growth this year has been “considerably slower” than it had expected, the Fed also said it expects “a somewhat slower pace of recovery over coming quarters”. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of August 7th
August 7, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
Leaders in Washington reached an agreement to raise the debt ceiling, averting a self-inflicted financial disaster. However, with the debt ceiling nonsense out of the way, investors were free to focus on the U.S. economic recovery and Europe’s debt crisis – and the outlook doesn’t look so hot. The U.S. economy has slowed and the downside risks to the growth outlook have increased. Although it still appears that the U.S. is likely to avoid a recession, the odds have increased. The European debt crisis appears to be enveloping Spain and Italy, which will be much bigger problems for the big banks in Europe. Stocks fell broadly around the world.
The July Employment report was consistent with the broad range of economic data releases of the last few weeks, suggesting a subpar economic recovery, but not a recession. Nonfarm payrolls rose by 117,000 – well above the +85,000 consensus forecast and, more importantly, not as bad as feared. The unemployment rate edged down to 9.1%, but would have risen if not for people exiting the labor force. After digesting the report, the stock market gave up gains made in an initial (positive) reaction to the report. Bonds yields fell. The dollar was mixed following efforts by the Swiss and the Japanese to weaken their currencies. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 31st
July 31, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
For some time, financial market participants have been complacent about the federal debt ceiling being raised. After all, we’ve been here before and when push comes to shove, lawmakers will raise the debt ceiling because they have to raise the debt ceiling. The consequences of not doing so would be catastrophic for the economy and the financial markets. However, as we near the August 2 deadline, both parties remain far apart, raising the possibility that the ceiling might not be raised in time. Already, investors have pulled out of money market funds (opting instead for FDIC-backed bank deposits). Banks have begun to raise capital and tighten credit on consumer and business borrowers – none of this is good for economic growth.
The economic data remained generally disappointing. The advance estimate of Q211 GDP growth came in at a 1.3% annual rate (vs. a median forecast of +1.8%), with consumer spending at a 0.1% pace (held back by higher gasoline prices and a drop in motor vehicle sales). More troublesome, benchmark revisions delivered downward adjustments to GDP figures for Q410 and Q111. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 24th
July 24, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic data were mixed. Housing starts rose sharply in June, but single-family permits were little changed. Home builder sentiment improved in July, but was still very low. Existing home sales for June disappointed.
The stock market reacted to varying perceptions about a deal to raise the debt ceiling. The Gang of Six plan appeared to have the most momentum. President Obama has agreed in principle to sign the resulting bill. It’s likely to clear the Senate, but could have some difficulty getting through the House. The plan would reduce the deficit by $3.7 trillion over 10 years, with $1 trillion in added revenue coming from tax reform. However, it’s unlikely that details of the plan will be worked out before the August 2nd deadline on the debt ceiling. So, an extension of the debt ceiling is expected to be needed. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 17th
July 17, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
Tensions increase around the federal debt ceiling. Moody’s and Standard & Poor’s indicated that the U.S.’ credit rating could be reduced if the debt ceiling isn’t raised. A downgrade would send ripples throughout the financial markets. The markets did not seem too concerned, apparently on the strong belief that the debt ceiling would be raised in time to avoid a self-inflicted financial market calamity.
The key paragraph from the June 22nd-23rd FOMC Minutes: “On the one hand, a few members noted that, depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run. On the other hand, a few members viewed the increase in inflation risks as suggesting that economic conditions might well evolve in a way that would warrant the Committee taking steps to begin removing policy accommodation sooner than currently anticipated.” In his monetary policy testimony, Chairman Bernanke presented a balanced outlook on monetary policy, but the markets only focused on the possibility of further asset purchases. [Read more]
The Weekly Market Snapshot from Frazier Allen for the week of July 10th
July 10, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The June Employment Report was weaker than expected, with no bright spots. Nonfarm payrolls rose just 18,000, while the two previous months were revised a net 44,000 lower. Private-sector payrolls rose by 57,000 – a 65,000 average for May and June, following a +240,000 average for February, March, and April. Manufacturing rose by 6,000. Construction fell by 9,000. Retail added 5,200. State and local government payrolls dropped another 25,000 (following -46,000 in May) and the federal government shed 14,000 (ex-census, down 18,000, or 0.6%, from a year ago). The unemployment rate edged up to 9.2% (from 9.1% in May) and the employment/population ratio slipped to 58.2% (vs. 58.4% in May and 58.5% a year ago). Average weekly hours edged down to 34.3 (from 34.4). Average hourly earnings were essentially unchanged (up 1.9% y/y). Average weekly earnings fell 0.3% (+2.1% y/y). [Read more]
Weekly Market Snapshot from Frazier Allen for the week of July 3rd
July 3, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The economic data were mixed. Personal income and spending figures shower a sharp small decline in inflation-adjusted consumer spending in both April and May. The trend suggests an annual rate of growth of less than 1% in Q2 2011 in consumer spending, which accounts for 70% of Gross Domestic Product. Consumer confidence fell in June. Weekly jobless claims remained moderately high. The ISM Manufacturing Index rebounded partly in June, but the details were mixed.
The stock market picked among the economic news, ignoring the poor economic data and embracing the favorable reports. Progress on an austerity package in Greece reduced near-term worries about the European sovereign debt situation, helping to fuel stock market gains. Bond prices fell, pushing the 10-year Treasury note yield back above 3.20% (after dipping below 2.90% on Monday). [Read more]
The Weekly Market Snapshot from Frazier Allen
June 26, 2011
Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services
The Federal Open Market Committee left short-term interest rates unchanged and retained its conditional commitment to keep rates low for “an extended period.” The FOMC also repeated that its $600 billion asset purchase program will be completed by the end of this month. The FOMC noted that the economic recovery is continuing, but “somewhat more slowly” than had been expected. The slower pace of the recovery “reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan.”
In his post-FOMC press briefing, Fed Chairman Bernanke said that while Fed policymakers expects growth to pick up into 2012, “we don’t have a precise read on why this slower pace of growth is persisting.” The FOMC lower its expectations of GDP growth for this year (2.7%-2.9%) and next (3.3%-3.7%). The FOMC expects that the unemployment rate will to continue to decline, “but the pace of progress remains frustratingly slow.” [Read more]