Weekly Economic & Market Update 7/20/2015

Week in Review

Global stocks rose this past week on appeasement from global central banks continuation of accommodative policies. In the course of this past week the European Central Bank (ECB) decided to leave its benchmark interest rate at near zero. Additionally, US Federal Reserve (Fed) chair, Janet Yellen, gave her semiannual Monetary Policy Report to congress where she made a strong indication of a benchmark rate increase for 2015.

Chair Yellen and others at the Fed have made it clear that if the economic data continues to move forward, a rate hike of .25% in 2015 is on the table. To some involved in the investing markets, a rate hike appears to be a kiss of death for the struggling economy. To others, it would be a validation of a forward moving economy.

At the heart of the debate over a Fed rate hike is the question of whether the economy is strong enough to take on higher interest rates. It is unlikely that the Fed will just make a token rate hike of a small amount and then stop. The more likely scenario, if history is the guide, is for a series of hikes. It is important to remember that the last time the Fed moved interest rates higher was in 2006. Further, when the Fed did raise rates it was small moves over time.

Realistically, the economy can probably handle a small move up in interest rates. The question about rates really is not about the economy being able to handle a small rate hike, but rather about how investors will react, or perhaps overreact, to a proposed hike. As always, we will continue to monitor markets for insight on these important questions.

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 7.20.15

 

 

 

 

 

 

 

 

Chart 2 – Aggregate Bond

 

AKG 7.20.15

 

 

 

 

 

 

 

 

Securities are offered through First Allied Securities, Inc. (FASI), a registered Broker Dealer, Member FINRA/SIPC. Advisory Services offered through Lighthouse Financial Advisors, Inc., a Registered Investment Advisor dba Lighthouse Wealth Management (LWM). Lighthouse Financial Advisors, Inc. is not a subsidiary or control affiliate of FASI.

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.