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September 21 2016

If it’s not one thing, it may be another.

Economic data released last week will factor into this week’s Federal Open Market Committee (FOMC) decision on whether to push interest rates higher in the United States. Some of the August data supports the idea economic growth was soft. For example, August retail sales fell more than expected, down 0.3 percent from July. Other data was as expected: U.S. producer prices were flat, which was in line with expectations.

However, the kicker may be inflation. It increased during August, “…offering fresh evidence that U.S. inflation may be firming after years of sluggish price growth,” wrote The Wall Street Journal. The Consumer Price Index, which is a gauge of inflation, rose more than economists had expected in August in large part because of higher healthcare costs, according to Reuters.

Stock markets steadied last week asthe chances of a rate hike this week declined. Barron’s reported:

“The probability of a rate hike, as measured by the fed-futures market, sank to 20 percent from more than 30 percent a week earlier. Still, investors fear a September surprise… ‘The Fed’s in a tough spot,’ says Aaron Clark, a portfolio manager at GW&K Investment Management. ‘The governors want to hike but the window is closing.’ The Fed can cry wolf so many times before it loses credibility and dilutes the power of “Fedspeak” in the future.”

If the FOMC increases rates this week, there may be “knee-jerk selloff,” according to Barron’s, and if rates remain unchanged, a relief rally may ensue. Either way, the paper opined, much will depend on the FOMC’s explanation.

So, will the Federal Reserve raise rates or won’t they? We’ll find out soon.

Sources:
http://www.bloomberg.com/news/articles/2016-09-15/retail-sales-in-u-s-decline-in-august-by-more-than-forecast
http://www.cnbc.com/2016/09/15/us-producer-price-index-aug-2016.html
http://www.wsj.com/articles/u-s-consumer-prices-rose-0-2-in-august-1474029209
http://www.reuters.com/article/us-usa-economy-idUSKCN11M193
http://www.barrons.com/articles/dow-s-p-eke-out-slim-gains-as-rate-fears-flag-1474097390?mod=BOL_hp_we_columns

  • Data as of 9/16/161-WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)0.0050.0470.0720.080.120.049
  • Dow Jones Global ex-U.S.-2.51.50.5-2.12.1-0.2
  • 10-year Treasury Note (Yield Only)1.7NA2.32.92.14.8
  • Gold (per ounce)-1.723.217.1-0.4-6.18.5
  • Bloomberg Commodity Index-0.95.7-6.7-13.6-12-6.3
  • DJ Equity All REIT Total Return Index-0.95.7-6.7-13.6-12-6.3

*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*S&P 500, Gold, Dow Jones Global ex-Us, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend).
*The DJ Equity All REIT Total Return Index does include reinvested dividends.
*All investments involve risk – coins and bullion are no exception. The value of the bullion and coins is affected by many economic circumstances, including the current market price of bullion, the perceived scarcity of the coins and other factors. Therefore, because both bullion and coins can go down as well as up in value, investing in them may not be suitable for everyone. Since all investments, including bullion and coins, can decline in value, you should understand them well, and have adequate cash reserves and disposable income before considering a bullion or coin investment.

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

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Securities offered through Gramercy Securities, Inc., 3949 Old Post Road, Charlestown, RI 02813, 1-800-333-7450

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