Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 17th, 2013

Clarksville, TN – In her nomination hearing before the Senate Banking Committee, Janet Yellen took a balanced approach in discussing how she would conduct monetary policy, but the markets took that as “dovish.”

She gave no hint that the pace of asset purchases would be tapered anytime soon, but she also cautioned that the program could not last indefinitely. She noted that the economy is far from fully recovered and indicated that “we have farther to go” in the labor market.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 12th, 2013

Clarksville, TN – The economic data surprised. Real GDP rose at a stronger-than-expected 2.8% annual rate in the advance estimate for 3Q13, but the figure was boosted by faster growth in inventories (which added 0.8 percentage point to GDP growth).

Consumer spending rose at a 1.5% annual rate, while business fixed investment rose 1.6% – nothing to write home about. The partial government shutdown had a mixed impact on the October employment figures.

Nonfarm payrolls rose by 204,000 (median forecast: +125,000), while August and September figures were revised a net +60,000.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of November 3rd, 2013

Clarksville, TN – As expected, the Federal Open Market Committee did not alter the pace of asset purchases (currently $85 billion per month). The FOMC noted that “the recovery in the housing sector slowed somewhat in recent months,” but removed the phrase (from the September 18th statement that “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market.”

That suggests that the Fed could still begin to taper the pace of asset purchases at the December policy meeting if the economic data between now and then are strong enough (although that’s not seen as likely).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of October 28th, 2013

Clarksville, TN – The September Employment Report (delayed from October 6) was disappointing relative to expectations (although hardly “weak”). Nonfarm payrolls rose by 148,000 (median forecast: +180,000). The two previous months were revised a net 9,000 higher.

Note that seasonal adjustment is often tricky in September (due to the start of the school year). The unemployment rate edged down to 7.2%, while the labor force participation rate held steady. The employment/population rate held steady, but was down slightly from a year earlier.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of October 22nd, 2013

Clarksville, TN – As was widely anticipated, lawmakers reached an 11th-hour agreement on the budget and debt ceiling. The “Continuing Appropriations Act, 2014” funds the government through January 15th, suspends the debt ceiling to February 7th, and requests bipartisan House/Senate budget negotiations by December 13th.

Thus, while the deal dodges a near-term financial catastrophe, it does not remove uncertainty entirely. Lawmakers will have less than three months to agree on a new spending authorization.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of October 13th, 2013

Clarksville, TN – The partial government shutdown and brinksmanship over the debt ceiling continued. However, financial market participants were encouraged by signs that the two sides were at least willing to talk to each other.

House Republicans appear to have abandoned demands for a repeal or delay of the Affordable Care Act, but it hasn’t been clear what they want instead. Note that a temporary (six-week or three-month) extension of the debt ceiling does not remove uncertainty completely, but it would sidestep a near-term financial catastrophe.

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