Weekly Economic & Market Update 9/14/2015

Week in Review

Global stock markets moved up this past week in the midst of light economic data point releases. As the previous week trudged on, more eyes started to focus on the coming week when the US Federal Reserve (FED) is expected to make their September benchmark interest rate decision. The arguments for and against a rate hike are as follows:

For a rate hike:
The FED has held rates near zero for seven years which has helped to stimulate some economic growth. While the economic growth has not been stellar, continuing to hold rates too low for loo long will (has?) created asset bubbles and encourages businesses to take abnormal risks. By raising rates in an effort to ‘normalize’ the economy, we will find out if the economy can stand on its own.

Against a rate hike:
Very simply, this side of the argument views the economy as being too weak to stand on its own and needing the zero interest rates to maintain the tepid economic growth.

For many economists and market observers, these arguments were always the long-term problem with extraordinary economic stimulus and zero interest rates. In the end it leaves the questions of when to pull the punch bowl away from the economic party? Therefore, it is no wonder that since the end of the quantitative easing program in the US and the chatter about rising rates, we have seen a pickup in the volatility in global investing markets.

The unfortunate truth is that either decision by the FED could move markets up or down which makes investing in this market very tricky. If the FED hikes rates, it may signal to Wall Street the end of easy money. Alternatively, Wall Street could breathe a sigh of relief that the FED actually sees the economy as strong enough to withstand a rate hike.

If the FED holds off on raising rates, Wall Street may see the continuation of easy money as a positive, but also may see a negative in that the FED sees the economy as still being too weak after seven years of rates at zero.

As always, we continue to monitor markets and remain cautiously optimistic on market reactions to central bank decisions.

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 9.14.15

Chart 2 – Aggregate Bonds

AKG 9.14.15

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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.