The Federal Reserve and the end of 2016

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Brexit, G20, Federal Reserve

“We can never know about the days to come, but we think about them anyway…”

-Carly Simon

Economists and market analysts have been thinking a lot about the Federal Reserve and the actions it may take before the end of 2016. Friday’s employment numbers helped fan the speculative fire. The U.S. Labor Department reported the unemployment rate remained at 4.9 percent with 151,000 jobs added during August.

The broad market consensus was 180,000 jobs would be created, according to MarketWatch. The publication cited a source as saying the report, “…wasn’t strong enough to force the Fed to raise rates in September, but it also wasn’t weak enough to raise concern about the U.S. economy or dampen the outlook for corporate earnings. As such it’s a mildly dovish report…”

Economists and political leaders also are thinking a lot about the impending British exit from the European Union (EU). At the G20 Summit – a forum for government and central bank leaders from 20 countries – British Prime Minister Theresa May confirmed, “Brexit means Brexit.” However, the BBC reported there remains a general lack of agreement within the British government about exactly what the country’s relationship with the EU should be after Brexit.

The potential effects of Brexit gained some clarity at the G20. The Guardian reported, “…the U.S. wanted to focus on trade negotiations with the EU and a bloc of pacific nations before considering a deal with the U.K.” In addition, it reported Japan threatened, “…a string of corporate exits from the U.K. unless some of the privileges that come with access to the single market are maintained.”

U.S. stock markets remained sanguine. The Dow Jones Industrial and Standard & Poor’s 500 Indices finished the month almost flat. Most stock markets across Europe finished the month higher.

Bloomberg Commodity Index

Sources:

  • http://www.azlyrics.com/lyrics/carlysimon/anticipation.html
  • https://www.dol.gov/newsroom/releases/opa/opa20160902
  • http://www.marketwatch.com/story/wall-street-poised-for-small-gains-with-key-jobs-report-ahead-2016-09-02
  • http://www.bbc.com/news/uk-politics-37269916
  • https://www.theguardian.com/world/2016/sep/04/g20-theresa-may-warns-of-tough-times-for-uk-economy-after-brexit
  • http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on “U.S. and Intl Recaps,” “U.S. rate expectations drive markets,” then scroll down to the “Global Stock Market Recap” chart) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/09-06-16_Barrons-Global_Stock_Market_Recap-Footnote_6.pdf)

Disclaimer

*These views should not be construed as investment advice. * The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * This newsletter was prepared in whole or in part by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Skygate Financial Group. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.