Last week there was a lot of volatility in the markets. A strong jobs report came out causing investors eyes to be on the Fed to see if they will raise interest rates. We still believe this will not happen until later in the year.
Support for a positive market
Economic reports were strong as there was a jump in personal income, salary, wages, and consumer spending. Also, the unemployment rate fell to 5.5%. In spite of the good week for the economy the markets went down. From a technical standpoint, the markets look favorable. We are in an area of the market where investors could start to buy bonds. If this happens, interest rates could go up. We believe this still won’t happen for quite a while.
Market reports this week
This week we will see reports on retail sales and the Consumer Price Index (CPI), which measures inflation. The news media have given a lot of attention to inflation recently, but we are still very concerned about deflation.
Money flows from Europe
The European Central Bank starts its massive bond buy back today and the U.S. should see a lot of that money flow its way. In Europe bonds have a negative yield, which means you are paying the government to hold your money. This is good for the government but not for European investors.
Positive market outlook
The Fed conducted a stress test of the top 31 banks in the country to determine how well they could survive another recession. For the first time since 2009, all 31 banks passed the stress test. This has the potential to turn back on the spigot for commercial and industrial loans, which is important for economic growth. We are seeing the banking system start to normalize again so the quantitative easing can start to flow to the borrower. Combine this with the current low interest rates and it becomes a very positive market outlook.
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fi-Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. fi-Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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