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

Clarksville, TN – In her speech, Fed Chair Yellen indicated that “given the risks, I consider it appropriate for the [FOMC] to proceed cautiously in adjusting policy.” This dovish stance was taken well by financial market participants.

Yellen emphasized that the Fed’s projections (such as the dots in the dot plot) are expectations and “not a plan written in stone.” Fed policy decisions will remain data-dependent, but Yellen stressed that the central bank has a limited ability to respond to downside shocks to the economy.

The economic data were mixed. Personal income and spending figures were soft in February, but the downward revision to January’s spending (from +0.5% to +0.1%), along with the previous week’s report on factory shipments, sent economists to revise lower their forecasts of 1Q16 GDP growth (now seen at a 0.5% to 1.0% annual rate, although there are several missing pieces still).

The employment report was roughly in line with expectations (nonfarm payrolls up by 215,000). The ISM manufacturing report was stronger than expected (but still not exactly “strong”). The Fed’s annual benchmark revisions to its industrial production figures showed a much slower pace of growth in manufacturing output in 2014-15 than was previously reported – however, the markets paid little attention to the news.

Next week, the economic calendar is relatively light. Investors are expected to focus on the ISM non-manufacturing report and the FOMC minutes. We know that officials are divided in their outlooks for the economy and the appropriate path of short-term interest rates. What’s more interesting is the range of views on uncertainty and the balance of risks (most likely, there will be nothing to suggest that the Fed is in any hurry to raise rates).

Important Disclosures

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Material prepared by Raymond James for use by its financial advisors.

The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business March 31st, 2016.

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