Clarksville Weekly Market Snapshot from Frazier Allen for the week of August 25th, 2013
August 25, 2013
Clarksville, TN – Fed tapering concerns continued to dominate the stock market action. The minutes of the July 30th-31st Federal Open Market Committee meeting provided little clarification.
Officials noted that the unemployment rate had fallen “considerably” since last fall (when QE3 began), with “solid” gains in nonfarm payrolls in recent months, but other measures of labor force utilization suggested “more modest” improvement.
From the minutes: “A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases. At the same time, a few others pointed to the contingent plan that had been articulated on behalf of the Committee the previous month, and suggested that it might soon be time to slow somewhat the pace of purchases as outlined in that plan.”
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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.
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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.
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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 July 30th, 2013
July 30, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data reports were mixed. Existing home sales fell slightly in July. New home sales jumped 8.3% (although figures for the two previous months were revised lower and the July increase was not statistically different from zero). A measure of manufacturing activity in China weakened in July, but the same measure for the euro area was about flat.
Next week, no changes are expected from the Federal Open Market Committee, but investors will be sensitive to any changes in the wording of the policy statement. Future Fed policy decisions will be driven by the economic data (or more precisely, the implications that the data will have for the economic outlook). [Read more]
Weekly Market Snapshot from Frazier Allen for the week of July 24th, 2013
July 24, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
In his monetary policy testimony to Congress, Fed Chairman Bernanke said that “a highly accommodative monetary policy will remain appropriate for the foreseeable future.” He indicated that the Fed is using asset purchases “primarily to increase the near-term momentum of the economy, with the specific goal of achieving a substantial improvement in the outlook for the labor market.”
The Fed will rely on its forward guidance that short-term interest rates will continue to remain exceptionally low “to help maintain a high degree of monetary accommodation for an extended period after asset purchases end, even as the economic recovery strengthens and unemployment declines toward more normal levels.” [Read more]
Weekly Market Snapshot from Frazier Allen for the week of July 16th, 2013
July 16, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Fed Chairman Bernanke said nothing new, but the markets interpreted his comments as “dovish.” In Q&A following a speech on the history of the Fed, Bernanke said that given the high level of joblessness and low inflation, “you can only conclude that a highly accommodative monetary policy is needed.”
He also conceded that “there is some prospective gradual change in the mix of instruments, but that shouldn’t be confused with the overall thrust of policy, which is highly accommodative.” That’s consistent with the Fed beginning to lower the rate of asset purchases later this year and maintaining low short-term interest rates for a long time (well into 2015).
The June 18th-19th FOMC minutes showed that “many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases.” However, “several members judged that a reduction in asset purchases would likely soon be warranted.” [Read more]
Weekly Market Snapshot from Frazier Allen for the week of July 7th, 2013
July 7, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The economic data were mixed. The June ISM non-manufacturing survey disappointed, but motor vehicle sales were strong and the employment report was better than anticipated. Nonfarm payrolls rose by 195,000 in June (the median forecast was 165,000), while figures for April and May were revised a net 70,000 higher.
Manufacturing payrolls continued to slide, but there were strong gains in business and professional services, as well as retail and leisure and hospitality. Payroll gains at eating and drinking establishments were strong for a third consecutive month (accounting for a little over a quarter of private-sector job gains in 2Q13).
The unemployment rate held steady at 7.6% (labor force participation edged higher). Long-term unemployment fell, but remained elevated. Unemployment rates for teenagers and young adults remain high. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of June 30th, 2013
June 30, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
Federal Reserve officials were out in force trying to soothe market fears. A range of Fed comments had added to market uncertainty in previous weeks, but officials are now singing out of the same page of the hymnal. The message: there was no change in the Fed’s monetary policy intentions last week.
Bernanke was merely clarifying the Fed’s decision-making process. Future policy moves will remain data-dependent. If the economic data come in weaker than anticipated, any reduction in the pace of the Fed’s asset purchases would be pushed out. Tapering is not tightening.
As the Fed slows the rate of asset purchases, it would still be added accommodation. The Fed expects to hold these securities for a long time, maintaining policy accommodation. A rise in the federal funds rate target is still a long way off. Most Fed officials expect the first increase in 2015. Equities rose and bond yields declined. [Read more]
Weekly Market Snapshot from Frazier Allen for the week of June 25th, 2013
June 25, 2013
Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The Federal Open Market Committee left short-term interest rates unchanged, did not alter its forward guidance on the overnight lending rate, and said it would maintain its asset purchase program at $85 billion per month. The policy statement was a near photocopy of the previous one.
The FOMC indicated that recent inflation readings have been low due partly to “transitory influences.” The downside risks to the outlook for growth and the labor market had “diminished” since the fall. The FOMC repeated that it could “increase or reduce” the pace of asset purchases depending on how the outlook for the labor market or inflation changes. [Read more]
