Clarksville Weekly Market Snapshot from Frazier Allen for the week of August 14th, 2016

Clarksville, TN – The economic data remained consistent with moderate economic growth and low inflation. Retail sales figures for July disappointed, coming in below expectations (but partly offset by upward revisions to June).

Preliminary productivity figures for the second quarter were weak (averaging a 0.5% annual rate over the last five years). Jobless claims remained very low. The Producer Price Index fell more than expected and pipeline pressures remained mild or slightly deflationary.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of August 7th, 2016

Clarksville, TN – As expected, the Federal Open Market Committee left short-term interest rates unchanged. In its policy statement, the FOMC noted that “on balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months.”

More importantly, “near-term risks to the economic outlook have diminished.” Kansas City Fed President Esther George dissented in favor of raising the federal funds target range by 25 basis points (to 0.50% to 0.75%).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of July 24th, 2016

Clarksville, TN – The economic data calendar was thin and reports were of little consequence for the markets. As expected, the European Central Bank left short-term interest rates unchanged and did not alter its asset purchase plans.

ECB President Draghi indicated that policymakers were encouraged by the financial stability following the initial reaction to the Brexit vote. He also said that more information will become available over time and the ECB would act using all possible tools “if needed.”

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of July 19th, 2016

Clarksville, TN – The economic data were generally on the strong side of expectations. Retail sales rose 0.6% in June (median forecast: +0.2%), but figures for April and May were revised down (still a strong quarter).

Industrial production rose 0.6%, but that largely reflected a rebound in auto output (which had fallen in May). Ex-autos, manufacturing output was flat (-0.2% y/y, consistent with a soft patch, not a recession).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of July 10th, 2016

Clarksville, TN – The economic data were mostly on the strong side of expectations. Nonfarm payrolls surprised sharply to the upside in June (+287,000), but that followed a very soft payroll figure for May (revised to +11,000).

The disappointing May number is now seen as an anomaly, but then so was the June figure. Large month-to-month swings in payrolls are unusual, but they do happen occasionally.

The three-month average payroll gain was +147,000, slower than in 1Q16 (+196,000) and 2015 (+221,000).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of July 6th, 2016

Clarksville, TN – Despite there being no plan for Brexit and expectations of a lengthy and uncertain process of disentanglement from the European Union, stock market fear subsided.

The impact on the U.S. economy of a weaker U.K. is expected to be small, and in some ways may even be positive (lower mortgage rates and greater capital flows to the U.S.). Long-term interest rates remain low.

Bank of England Governor Carney helped things along by suggesting that a rate cut would likely be warranted this summer (the BoE’s Monetary Policy Committee will meet on July 14th).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of July 3rd, 2016

Clarksville, TN – U.S. financial markets spent most of the week pricing in a greater likelihood that the United Kingdom would vote to remain in the European Union.

Oops. The surprise “leave” victory in the U.K. referendum sent markets reeling. Global stock markets fell sharply. The pound plunged (to a 30-year low). Bond yields sank, reflecting a flight to safety.

Still, this wasn’t a Lehman-type event. Market participants were simply caught leaning the wrong way. Prime Minister Cameron resigned, effective October, leaving his predecessor a lengthy negotiation with the EU on exit terms.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of June 19th, 2016

Clarksville, TN – The Federal Open Market Committee left short-term interest rates unchanged, as expected.

In its policy statement, the FOMC noted that “the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up.” At the same time, “growth in household spending has strengthened” and “the drag from net exports appears to have lessened.”

The dots in the dot plot drifted a bit lower (that is, expectations of future rate increases become even more gradual).

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of June 12th, 2016

Clarksville, TN – Fed Chair Janet Yellen said she was “cautiously optimistic” in her speech on the economy and monetary policy. She expects that further gradual increases in the federal funds target rate will be warranted, but she also stressed a number of near-term uncertainties.

This week, the mid-month economic data releases will be important, especially Tuesday’s retail sales figures, but the focus will be on the Fed.

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Clarksville Weekly Market Snapshot from Frazier Allen for the week of June 5th, 2016

Clarksville, TN – The economic data reports were mixed, but mostly on the soft side of expectations. The ISM Manufacturing Index surprised (modestly) to the upside, boosted by a lengthening in supplier delivery times (anecdotally, many firms had trimmed inventories in anticipation of softer demand, but sales surprised and they are now scrambling a bit to restock).

The Conference Board’s Consumer Confidence Index slid. Unit auto sales were strong, but were supported by an increase in fleet sales (rental cars, etc.). The ADP estimate of private-sector payrolls was moderate strong, with continued hiring at small and medium-sized firms.

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