Weekly Market & Economic Update 3/23/2015

Global stocks moved higher this past week because of one word being absent in the US Federal Reserve’s (FED) Federal Open Market Committee statement. The word that was missing was patient. For the last year or so the FED statements have claimed that the FED was willing to be patient with raising the benchmark interest rate in the US. The removal of the word, as well as other associated comments, sent global stock markets roaring higher this past Wednesday.

Very simply, the FED has no idea how to wiggle its way out of the corner it has painted the economy into with 7 years of zero interest rates. A few years ago the FED stated that it would consider raising rates once the unemployment rate hit a certain level. That level was reached. Then, the FED stated it would be patient with raising rates. The word patient was inserted to appease the marketplace that the FED would not be rash and raise rates ‘too soon.’ Unfortunately, there is no historical precedent for how to unwind what the Fed and other global central banks have done with zero interest rates for so long. Even though patience was dropped, the following press conference held by FED chair Yellen, made it clear that it is unlikely that the FED will be raising rates anytime soon. Additionally, much of the forecast that the FED published points to a weaker economy. Logically then, a weaker economy will dictate the FED continues to hold rates on the floor. Therefore, the market moved higher.

We continue to be cautiously optimistic on the markets as the FED and other central banks continue to place supports under the marketplace. Our caution comes from the reality that the central banks are taking unprecedented, extraordinary actions that do not come risk free. And, so long as that is the case we remain cautious and are watching markets closely.

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.

Chart 1 – S&P 500

$SPX 3-23

Chart 2 – Aggregate Bond

$AKG 3-23

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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 Katy Chase

Katy Chase, MBA, contributes her own perspective to the team. With previous training in Marketing and French, her perspective offers a mixture of macroeconomic, cultural, and client-focused experiences. In addition, Katy is a baker (with a specialty in chocolate), athlete, perpetual student/learner, volunteer, blogger, Nittany Lion, daughter, grand-daughter, sister, and wife.