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Market Update - September 3, 2014

As Russia & Ukraine edge towards a cease fire, the markets are reacting favorably today. Although nothing formal has been announced, the fact that both sides are participating is encouragement enough that their views are no longer catawampus. The latest revised announcement from both Presidents Putin & Poroshenko references a “cease-fire process.” Whatever they mutually agree to name it, the end result will provide stimulation to world markets.

Yesterday we saw economic reports released which showed continuing encouragement. The ISM Manufacturing Index came in stronger than expected, and construction spending increased by 1.8% in July. The ISM (Institute of Supply Management Index) is a good indicator of national economic conditions as it takes into account production inventories, new orders, employment and supplier deliveries.

The chart below shows us where the markets stand through the end of August.

Index

Weekly Return %

thru Aug 29, 2014

YTD Return %

Dec 31, 2013 – Aug 29, 2014

DJIA1                     

+0.6

+3.2

NASDAQ Composite2

+0.9

+9.7

S&P 500 Index3

+0.8

+8.4

Bond Yields

Aug 29 Yield & Weekly Change

Yield - % a/o   Dec 31, 2013

3-month T-bill

0.03           Unch

0.07

2-year Treasury

             0.50           -0.03

0.38

10-year Treasury

2.34           -0.06

3.04

30-year Treasury

3.08           -0.08

3.96

Commodities

Aug 29 Price &   Weekly Change

Year end 2013

Oil per barrel4

       $95.90             +2.54

    $98.42

Gold per ounce5

  $1,285.75           +8.50

$1,201.50

Sources: U.S. Treasury, MarketWatch, St. Louis Federal Reserve, CNBC, Energy Information Admin.

Market Update - August 28, 2014

Today we are experiencing some market weakness largely stemming from the latest concerns in Ukraine. Ukrainian President Petro Poroshenko said Thursday that "Russian forces have entered Ukraine." This type of political uncertainty can cause economic fears to rise.

In the overall economic picture here in the United States, we have received some positive data today. The economy is showing continued signs of strength with Gross Domestic Product being revised to show an annual growth rate of 4.2%, up from the previously speculated 4%. Business investment, exports & equipment spending all helped bump the estimates.

Weekly jobless claims also fell, showing potential positivity on the overall job market.

Although not quite ubiquitous, the US economy is showing positive signs in many areas.

With Labor Day weekend just around the corner, we would like to remind you that our offices will be closed on Monday September 1st. We will resume normal business hours on Tuesday September 2nd.

As summer winds down, and sunset hits for the first time before 8:00 (official sunset is 7:59 tonight) we hope you are able to get out and enjoy this beautiful time of year.

Market Update - August 25, 2014

Against the backdrop of the grandeur of the Teton Range in Wyoming, Fed Chief Janet Yellen delivered a key address at the annual Economic Symposium hosted by the Federal Reserve Bank of Kansas City.

 

Index

Weekly Return %

thru Aug 22, 2014

YTD Return %

Dec 31, 2013 – Aug 22, 2014

DJIA1

+2.0

+2.6

NASDAQ Composite2

+1.7

+8.7

S&P 500 Index3

+1.7

+7.6

Bond Yields

Aug 22 Yield & Weekly Change

Yield - % a/o Dec 31, 2013

3-month T-bill

             0.03           Unch

0.07

2-year Treasury

0.53            +0.11

0.38

10-year Treasury

2.40             +0.06

3.04

30-year Treasury

3.16             +0.03

3.96

Commodities

Aug 22 Price & Weekly Change

Year end 2013

Oil per barrel4

       $93.36             -1.83

    $98.42

Gold per ounce5

$1,277.25           -18.75

$1,201.50

Sources: U.S. Treasury, MarketWatch, St. Louis Federal Reserve, CNBC, Energy Information Admin.

 

Entitled Labor Market Dynamics and Monetary Policy, it was heavy on academics, and at many times, drifted deep into the weeds.

 

Since Yellen took over as chair early this year, her focus has been on cutting back on the Fed’s monthly bond purchases while keeping interest rates low as a way to stimulate economic growth and boost employment.

 

Her thinking – there’s still plenty of slack in the labor market (defined as able-bodied men and women who want to work, have the skills to work, but can’t find employment), and the Fed’s monetary policy can boost economic activity and rev up employment growth.

 

She remained noncommittal on how the improving job market might affect monetary policy, but she is beginning to carefully consider the idea that slack in the labor force is dwindling. If that is the case, she appeared to be laying the groundwork for an eventual hike in interest rates.

 

Yellen noted that labor market gauges “have improved more rapidly than the (Fed) had anticipated (Federal Reserve website)."

 

With the economy getting closer to our objectives, the (Fed’s) emphasis is naturally shifting to questions about the degree of remaining slack (in the labor market), how quickly that slack is likely to be taken up, and thereby to the question of under what conditions we should begin dialing back our extraordinary accommodation (raising interest rates).”

 

But she was quick to point out that measuring slack in the labor force is imprecise, and “there is no simple recipe” when it comes to setting a course for monetary policy given the many complexities and changing dynamics in the labor force.

 

 

Notably, she repeated her comment from her July testimony before two Congressional committees that the Fed stands ready to hike rates sooner and at a more rapid pace than anticipated if employment or inflation comes in above forecasts.

 

But she gave the Fed plenty of wiggle room if growth disappoints or the rate of inflation slows.

 

New highs

The modest downdraft in stocks at the end of July has been followed by three-consecutive weekly gains, culminating with a record high in the S&P 500 Index last Thursday (MarketWatch data).

 

Moderate economic growth, rising corporate profits (Thomson Reuters), and low interest rates remain the standard “go-to themes.” But we’ve also seen tensions recede in Ukraine.

 

In addition, the jump in yields for junk bonds in July and the subsequent flow of cash out of riskier debt (Wall Street Journal, Lipper, and St. Louis Federal Reserve) has attracted buyers, calming nerves in the bond market, which also lent support to stocks.

A Note on Interest Rates - August 19, 2014

As the Federal Reserve makes strides in the easing of their monetary policy, the markets have used that as fuel for down days recently. This chart is a good reminder that higher interest rates do not always generate negative returns for stocks.

 

Source: Ritholz.com

Market Update - August 14, 2014

This morning we are seeing the markets hold on to some early morning gains after the Dow closed strong yesterday, ending back in positive territory for the year. Today we also saw U.S. jobless claims increase by 21,000. This number was more than economists had forecasted.

Over the last month, we saw the markets rise & fall with no real traction. Although the Dow is now positive for the year, we are still below its July high. This is fairly normal as we have seen some global turmoil with an increase in geo-political risks, as well as uncertainty here at home with the pending changes to the Federal Reserve’s monetary policy.

Locally, we have seen some dry lightning strikes in recent days. This is a good reminder that it is important to have a fire /disaster checklist in place. Make sure that it is easily accessible (such as stored on your phone), and it includes important documents and a list of personal valuables that would be difficult to replace in the event of a catastrophe. If you only had three minutes to get your most treasured personal belongings out of your house, it would be highly beneficial to have this list current and at your fingertips in a moment’s notice.

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