Investment Commentary – April 27th, 2016
Market Indices as of Market Close April 27th, 2016
Dow 18,041 (3.54% YTD)
S&P 2,095 (2.51% YTD)
NASDAQ 4,863 (-2.88% YTD)
Global Dow 2,397 (2,033 52 week low /2,644 high)
10-year Treasury 1.85 (1.53 52 week low /2.50 high)
Gold 1,247 ($1,047 52 week low /high $1,288)
Oil $45.33 ($29.85 52 week low /high $65.93)
Fed signals no rush to raise rates as pace of U.S. recovery moderates
The Federal Reserve held interest rates unchanged on Wednesday and while it left the door open to a hike in June; its statement implied that it was in no hurry to follow on from its December rate rise.
The U.S. central bank’s policy-setting committee said the labor market had improved further despite a recent economic slowdown and that it was keeping a close eye on inflation.
It added that global economic headwinds remained on its radar, but removed a specific reference from its last policy statement to the risks they posed.
Traders kept their bets that the first rise of 2016 would come in September and less than even odds that a second hike would come by December. Fed rate setters forecast two hikes this year.
“The committee continues to closely monitor inflation indicators and global economic and financial developments,” the Fed said in a statement following a two-day meeting.
It kept the target range for its overnight lending rate in a range of 0.25 percent to 0.50 percent, in line with expectations in a Reuter’s poll. The Fed hiked rates in December for the first time in nearly a decade.
For the third consecutive meeting, it did not include any mention of the balance of risks to the economy.
JP Morgan Thought of the Week
While monetary policy “divergence” has been the talk of the town, “convergence” is more
fitting for central banks in Europe. Sweden’s Riksbank seems to be aiming to weaken the
krona to keep it competitive and push prices closer towards its 2% inflation target. This is
despite impressive Swedish GDP growth of 4.5% y/y. The Riksbank recently raised its QE
programme amount, saying the increase was made to keep a rising krona in check.
Fortunately for the Riksbank, the currency weakened, if only slightly, on the
announcement. However if the ECB continues cutting rates and adding to its QE
programme, we would expect even more from the Riksbank in the quarters to come.
THIS DAY IN FINANCIAL HISTORY
April 27th, 1966
With the transportation climate in the U.S. relying more on the car railroads were hit hard. This forced the Pennsylvania and New York Central Railroads to merge. On this day the merger was finalized giving the newly named Pennsylvania and New York Central Transportation Company $4 billion in assets. This marked the biggest merger in U.S. corporate history at the time.
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.