Weekly Market & Economic Update 3/2/2015

Global markets registered a sideways move this past week as economic data inspired investors to continue to question the fate of interest rates. The big questions are: will they raise rates or won’t they raise rates, and if they do, how much? The Federal Reserve (FED) has been telegraphing that the decision to raise rates is not only data dependent but also dependent on the feasibility that the recovery in the economy will stick. The economic data points from this past week along with the FED’s recent comments has set a confusing table. On the FED’s side of things, it sees the weakness in the economy as driven by ‘transitory’ in nature and driven by weather and lower oil prices. To be clear, the colder weather is seen as driving consumers to spend less and lower oil prices translate to lower inflationary pressures which the FED wants to see rising as well.

The economic data points from the US this past week were mostly lower. Readings from home sales to durable goods orders to economic sentiment were all lower than previously reported. So, the big question becomes: is the weakness structural or transitory? The FED is trying to be cautious not to raise rates too soon so as to not derail any recovery in the economy. At the same time the FED knows that having held rates this low this long has created an economic dependency on low rates that will be hard to unwind.

Overseas the only notable releases were from Europe with a lower Consumer Price Index report and lower private loan numbers. As has been the case, the European economy has struggled and continues to struggle. Even though the European Central Bank (ECB) has rolled out economic stimulus programs, it is likely that more stimuli are coming in an effort to boost the economy.

Like it or not the global economy and investing market participants are now trained to hang on every word or rumbling from central banks as they now hold a lot of sway over the direction of markets. We will continue to monitor global economic developments in an attempt to gain insight into the decisions that impact the markets.

Getting Technical With Market Charts

In this section we present charts of the S&P 500 Stock Index and the US Bond Market Index relative to their 50 day (blue line) and 200 day (red line) moving averages. In addition, we have added the blue shaded area which represents the recent trading channel. The 50 and 200 day moving averages are widely followed market trend indicators that provide a general picture of the health of the broad indexes.

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Disclaimer – Information contained herein is taken from sources believed to be reliable, but cannot be guaranteed as to its accuracy. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. The Standard and Poors 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Contact your investment professional to discuss suitability for your particular circumstances. This article does not constitute an offer of sales of any securities. Securities trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Lighthouse Financial Advisors, Inc., dba Lighthouse Wealth Management, is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.

About Henry Becker

Henry L. Becker, Jr., CFP® has 15 years of experience in the financial services and investment advisory business. Henry is the Director of Research and Investment Strategy for Lighthouse Wealth Management. In addition, Henry is a world traveler (23 countries and counting), blogger, Hemingway reader, historian, Austrian economist, Roman history enthusiast, mountain biker, and skier.