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Weekly Market Snapshot

December 19, 2014

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

The stock market's anxieties about oil prices, the Fed, and the rest of the world gave way to a renewed sense of optimism (or at least less pessimism).

Heading into the Federal Open Market Committee meeting, the key question was whether it would abandon the "considerable time" phrase. The FOMC had it both ways, removing the phrase, saying instead that it could "be patient" in deciding when to begin normalizing policy, but quickly adding that the intent is exactly the same. The dots in the dot plot, Fed officials' projections of the appropriate federal funds rate at the end of each of the next few years, were still all over the place, but the 2015 dots may be starting to split into two camps: one that wants to begin raising rates a little sooner (March, April), the other a little later (July, September, October). Fed Chair Janet Yellen continued to emphasize that future policy decision will be data dependent and downplayed the "transitory" impact of lower oil prices. Still, the body language suggested that officials will be cautious. Yellen dispelled two popular misconceptions. One was that the Fed can begin tightening at any meeting, not just those with scheduled press briefing (March, June, September). The other was that people shouldn't assume that the Fed will move in measured steps (25 basis points per policy meeting) when tightening begins.

Next week, the financial markets should be in holiday mode. The reports on home sales and durable goods orders are often volatile and the markets could overreact to a surprise, but it should be a relatively dull week.


Indices

  Last Last Week YTD return %
DJIA 17356.87 17533.15 4.71%
NASDAQ 4644.31 4684.03 11.20%
S&P 500 2012.89 2026.14 8.90%
MSCI EAFE 1740.95 1797.34 -9.12%
Russell 2000 1174.83 1161.87 0.96%

Consumer Money Rates

  Last 1 year ago
Prime Rate 3.25 3.25
Fed Funds 0.13 0.08
30-year mortgage 3.80 4.47

Currencies

  Last 1 year ago
Dollars per British Pound 1.571 1.630
Dollars per Euro 1.245 1.377
Japanese Yen per Dollar 117.190 102.960
Canadian Dollars per Dollar 1.166 1.058
Mexican Peso per Dollar 14.791 12.950

Commodities

  Last 1 year ago
Crude Oil 56.47 97.22
Gold 1197.54 1237.33

Bond Rates

  Last 1 month ago
2-year treasury 0.63 0.51
10-year treasury 2.19 2.33
10-year municipal (TEY) 3.22 3.56

Treasury Yield Curve – 12/19/2014


S&P Sector Performance (YTD) – 12/19/2014



Economic Calendar

December 22  —  Existing Home Sales (November)
December 23  —  Real GDP (3Q14, 3rd estimate)
Durable Goods Orders (November)
UM Consumer Sentiment (December)
Personal Income and Spending (November)
New Home Sales (November)
December 24  —  Initial Claims (week ending December 20)
December 25  —  Christmas Holiday (markets closed)
December 30  —  Consumer Confidence (December)
January 1  —  New Year's Day (markets closed)
January 2  —  ISM Manufacturing Index (December)
January 7  —  FOMC Minutes (December 16-17)

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.

Data source: Bloomberg, as of close of business December 18, 2014.

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