Clarksville Weekly Market Snapshot from Frazier Allen for the week of December 6th, 2016

Clarksville, TN – There was a ton of economic data, most of it consistent with moderately strong growth in the near term. Nonfarm payrolls rose in line with expectations in November.

The unemployment rate fell to 4.6% (the lowest since August 2007), but that was partly due to a drop in labor force participation. Average hourly earnings fell 0.1%, following a 0.4% rise in October, up 2.5% y/y (still trending higher, but more moderately than it appeared a month ago).

Real GDP rose at a 3.2% annual rate in the second estimate for 3Q16 (vs. +2.9% in the advance estimate), reflecting an upward revision to consumer spending growth (note that a third of 3Q16 GDP growth was due to a surge in soybean exports).

The ISM Manufacturing Index was a bit stronger than anticipated (still relatively lackluster). The Conference Board’s Consumer Confidence Index improved. 

The financial markets continued to look beyond the economic data to the outlook for 2017 (the Trump trade – lower tax rates, reduced regulation, higher bond yields). However, investors struggled to assess how much is already factored in. 

Next week, the economic calendar thins out. The ISM Non-Manufacturing Index has some potential to surprise. The October trade data should show a pullback in soybean exports (which added nearly a full percentage point to 3Q16 GDP growth – hence, an expected drag on 4Q16 GDP growth). Italy votes on its constitutional referendum on Sunday.

Some see this as a possible step in the breakup of the European Union, but that may be a stretch. Prime Minister Renzi has indicated that he will resign if the “no” campaign wins. A “yes” vote would streamline the government, making it easier to get things done, such as dealing with the country’s banking crisis. “No” had been leading in the polls, but for the most part, a “no” victory should be factored into the markets.

Important Disclosures

Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Investing involves risk and investors may incur a profit or a loss.

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Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.

Material prepared by Raymond James for use by its financial advisors.

The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business December 1st, 2016.

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