TBT Financial ServicesAn Independent Firm

Weekly Market Snapshot

September 23, 2016

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

As expected, the Federal Open Market Committee did not raise interest rates following its two-day policy meeting: “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Three of the district bank presidents dissented in favor of an immediate rate hike. In its Summary of Economic Projections, Fed officials significantly lowered their expectations of the future path of the federal funds rate for 2017 and 2018. In her post-meeting press conference, Fed Chair Janet Yellen said: “Conditions in the labor market are strengthening, and we expect that to continue, and while inflation remains low, we expect it to rise to our 2% objective over time - but with labor market slack being taken up at a somewhat slower pace than in previous years, scope for some further improvement in the labor market remaining, and inflation continuing to run below our 2% target, we chose to wait for further evidence of continued progress toward our objectives.”

The downward shift in the Fed’s expectations of future rate hikes was taken well by the financial markets. However, the main reason that the Fed’s interest rate outlook has drifted lower is that the outlook for economic growth has moderated (due to slower population growth and a weak trend in productivity growth).

Next week, financial markets will surely be interested in the first presidential debate between Trump and Clinton - however, more for the entertainment value than for the hope of gaining insight from the exchange of ideas. Many of the economic reports (consumer confidence, durable goods orders) have some potential to surprise, but are unlikely to significantly alter the overall economic picture. However, the monthly personal spending figures represent 70% of Gross Domestic Product (although are often ignored by the markets). A number of senior Fed officials will be speaking, but not about monetary policy (but you never know).


Indices

  Last Last Week YTD return %
DJIA 18392.46 18212.48 5.55%
NASDAQ 5339.52 5249.69 6.63%
S&P 500 2177.18 2147.26 6.52%
MSCI EAFE 1728.08 1676.17 0.69%
Russell 2000 1263.44 1227.02 11.23%

Consumer Money Rates

  Last 1 year ago
Prime Rate 3.50 3.25
Fed Funds 0.40 0.13
30-year mortgage 3.43 3.86

Currencies

  Last 1 year ago
Dollars per British Pound 1.308 1.525
Dollars per Euro 1.121 1.119
Japanese Yen per Dollar 100.76 120.28
Canadian Dollars per Dollar 1.304 1.332
Mexican Peso per Dollar 19.615 17.118

Commodities

  Last 1 year ago
Crude Oil 46.07 44.48
Gold 1344.70 1131.50

Bond Rates

  Last 1 month ago
2-year treasury 0.77 0.78
10-year treasury 1.69 1.56
10-year municipal (TEY) 2.36 2.18

Treasury Yield Curve – 09/23/2016


As of close of business 09/22/2016


S&P Sector Performance (YTD) – 09/23/2016



As of close of business 09/22/2016


Economic Calendar

September 26  —  New Home Sales (August)
First Presidential Debate (Hempstead, NY)
September 27  —  Conference Board Consumer Confidence (September)
September 28  —  Durable Goods Orders (August)
September 29  —  Jobless Claims (week ending September 24)
Real GDP (2Q16, 3rd estimate)
September 30  —  Personal Income and Spending (August)

Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. There is no assurance that any trends mentioned will continue in the future. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Also municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Investing involves risk and investors may incur a profit or a loss.

US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.

Tax Equiv Muni yields (TEY) assumes a 35% tax rate. Municipal securities may lose their tax-exempt status if certain legal requirements are not met, or if tax laws change.

Material prepared by Raymond James for use by its financial advisors. All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur. Investing involves risks including the possible loss of capital.

Data source: Bloomberg, as of close of business September 22, 2016.

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