AMERIPRISE FINANCIAL, INC.
Is the Greek Financial Standoff Finally Coming to an end?
06/22/2015
At last week's meeting the Federal Reserve adjusted lower both its assessment of 2015 U.S. GDP growth and the projected rate of increase in fed funds over the next two years. In doing so it moved slightly closer to the prevailing view of the marketplace, which has been consistently less optimistic about the pace of the economic recovery. But it also maintained its expectation of two quarter point rate increases this year, implying a likely liftoff in September, assuming the data between now and then reinforces the Fed's acknowledgement of the recent rebound of activity from the sluggish first quarter.
In the wake of the Fed's decision, the dollar weakened, while stocks and bonds rallied. Just prior to the Fed's announcement on Wednesday the ten-year Treasury note was yielding 2.39 percent only to end the week at 2.26 percent. Versus the euro the dollar weakened from 1.127 to 1.135, and versus the yen it fell to 122.7 from 124.3. The S&P 500 was flat on the week heading into the Fed meeting and went on to post a 0.8 percent gain, its best performance since late April, although it did drift lower on Friday. The Nasdaq Composite climbed 1.3 percent, while establishing another new high on Thursday.
The Fed Lowers its GDP Outlook for the Year
In lowering its outlook for full year GDP growth, to 1.9 percent from its 2.5 percent forecast in March, the Fed was not only acknowledging the reported 0.7 percent contraction in the first quarter, but was also lowering its assessment of the expected rebound over the remaining three quarters.
But many economists expect first quarter GDP to be revised upward, possibly to flat, after the Bureau of Economic Analysis concludes its seasonal adjustment methodology on June 30. If the Fed agrees with that expectation it means they expect only average growth of roughly 2.5 percent over the remainder of the year. And if the Fed expects no upward adjustment to Q1 GDP, that still implies growth of roughly just 2.75 percent over the remaining three quarters.
Ameriprise GDP Expectations
In contrast, Ameriprise Senior Economist Russell Price expects an upward adjustment in Q1 to -0.2 percent, and growth of 2.8, 3.6 and 3.0 percent over the next three quarters, implying a notably sharper rebound than the Fed. Of course, as Fed Chair Yellen has repeatedly pointed out, the Fed's actions remain data dependent. It next updates its forecast at the September meeting, meaning three full months of additional data will have become available. By then, either the Fed's dovish turn in June will have been validated, or the market's vote of approval last week will have to be reassessed.
The Greek Financial Situation Reaches a Breaking Point
It appears that we have arrived at the denouement of the Greek financial standoff. What has been an ongoing distraction amidst an endless series of presumed deadlines and fruitless negotiating sessions seems to be at the point of resolution, one way or the other.
An emergency meeting of European leaders will take place on Monday, after no agreement was reached at a scheduled meeting of finance ministers last Thursday. France and Germany have told Greece that, in fact, an agreement at the ministerial level must be reached before Monday's meeting since it will be for purposes of review, not negotiation.
The Greek cabinet met on Sunday and Bloomberg reports that the leaders of Germany, France and the European Commission have been briefed on a "definitive" proposal from the Greek government that was reviewed on Sunday by its creditors at a meeting in Brussels. In a sign of the precarious nature of the financial situation in Greece, withdrawals from the banking system have accelerated, ahead of possible credit controls. This prompted the European Central bank to once again increase its credit line to the Greek central bank on Friday so that withdrawals would continue to be honored. According to reports, at Thursday's finance ministers meeting, in response to a question as to whether Greek banks would remain open, ECB board member Benoit Coeure responded, "Tomorrow, yes. Monday, I don't know."
Important Disclosures:
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.
The S&P 500 is an index containing the stocks of 500 large-cap corporations, most of which are American. The index is the most
Source: Bloomberg, a financial software, data and media company
Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
06/22/2015
At last week's meeting the Federal Reserve adjusted lower both its assessment of 2015 U.S. GDP growth and the projected rate of increase in fed funds over the next two years. In doing so it moved slightly closer to the prevailing view of the marketplace, which has been consistently less optimistic about the pace of the economic recovery. But it also maintained its expectation of two quarter point rate increases this year, implying a likely liftoff in September, assuming the data between now and then reinforces the Fed's acknowledgement of the recent rebound of activity from the sluggish first quarter.
In the wake of the Fed's decision, the dollar weakened, while stocks and bonds rallied. Just prior to the Fed's announcement on Wednesday the ten-year Treasury note was yielding 2.39 percent only to end the week at 2.26 percent. Versus the euro the dollar weakened from 1.127 to 1.135, and versus the yen it fell to 122.7 from 124.3. The S&P 500 was flat on the week heading into the Fed meeting and went on to post a 0.8 percent gain, its best performance since late April, although it did drift lower on Friday. The Nasdaq Composite climbed 1.3 percent, while establishing another new high on Thursday.
The Fed Lowers its GDP Outlook for the Year
In lowering its outlook for full year GDP growth, to 1.9 percent from its 2.5 percent forecast in March, the Fed was not only acknowledging the reported 0.7 percent contraction in the first quarter, but was also lowering its assessment of the expected rebound over the remaining three quarters.
But many economists expect first quarter GDP to be revised upward, possibly to flat, after the Bureau of Economic Analysis concludes its seasonal adjustment methodology on June 30. If the Fed agrees with that expectation it means they expect only average growth of roughly 2.5 percent over the remainder of the year. And if the Fed expects no upward adjustment to Q1 GDP, that still implies growth of roughly just 2.75 percent over the remaining three quarters.
Ameriprise GDP Expectations
In contrast, Ameriprise Senior Economist Russell Price expects an upward adjustment in Q1 to -0.2 percent, and growth of 2.8, 3.6 and 3.0 percent over the next three quarters, implying a notably sharper rebound than the Fed. Of course, as Fed Chair Yellen has repeatedly pointed out, the Fed's actions remain data dependent. It next updates its forecast at the September meeting, meaning three full months of additional data will have become available. By then, either the Fed's dovish turn in June will have been validated, or the market's vote of approval last week will have to be reassessed.
The Greek Financial Situation Reaches a Breaking Point
It appears that we have arrived at the denouement of the Greek financial standoff. What has been an ongoing distraction amidst an endless series of presumed deadlines and fruitless negotiating sessions seems to be at the point of resolution, one way or the other.
An emergency meeting of European leaders will take place on Monday, after no agreement was reached at a scheduled meeting of finance ministers last Thursday. France and Germany have told Greece that, in fact, an agreement at the ministerial level must be reached before Monday's meeting since it will be for purposes of review, not negotiation.
The Greek cabinet met on Sunday and Bloomberg reports that the leaders of Germany, France and the European Commission have been briefed on a "definitive" proposal from the Greek government that was reviewed on Sunday by its creditors at a meeting in Brussels. In a sign of the precarious nature of the financial situation in Greece, withdrawals from the banking system have accelerated, ahead of possible credit controls. This prompted the European Central bank to once again increase its credit line to the Greek central bank on Friday so that withdrawals would continue to be honored. According to reports, at Thursday's finance ministers meeting, in response to a question as to whether Greek banks would remain open, ECB board member Benoit Coeure responded, "Tomorrow, yes. Monday, I don't know."
Important Disclosures:
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.
The S&P 500 is an index containing the stocks of 500 large-cap corporations, most of which are American. The index is the most
Source: Bloomberg, a financial software, data and media company
Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
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