Wednesday, February 4, 2015


Perspectives from Above the Noise – Week of February 2, 2015 



The Fed's latest policy statement was released last Wednesday and proved more eventful than expected by disappointing investors who were anticipating a more dovish stance in light of growing global deflationary pressures. Unsurprisingly, the Fed removed its "considerable time" language from the statement and kept the phrase "patient" to describe the timing of the first rate hike. This means there will almost certainly be no rate hike for at least the next two meetings. At the same time, the Fed offered a more upbeat view, saying the U.S. economy was "expanding at a solid pace," upgraded from a "moderate pace" in the previous statement. 


For the week, the S&P 500 fell -2.77%, the Dow Jones Industrial Average dropped -2.87%, and the MSCI EAFE (developed international) lost -0.25%.



Here are the 3 stories this week that rose above the noise:



India and Australia Take Steps to Lift Growth

India and Australia joined a long list of global central banks that have recently announced additional monetary stimulus efforts to bolster their economies. India reduced the statutory liquidity ratio (reserves that commercial banks must hold) to 21.5 percent from 22 percent in an attempt to free banks to lend more instead of parking money in government bonds.

The Reserve Bank of India had previously surprised investors by cutting rates on January 15. Separately, the Reserve Bank of Australia reduced its benchmark interest rate by a quarter-point to 2.25 percent, as the mining sector there has slowed because of tumbling mineral prices. Most economists had not expected the Reserve Bank of Australia to cut interest rates until its next monetary policy meeting in March.

What Negative Bond Yields Mean for Investors

A posting from The Wall Street Journal MoneyBeat blog explores one of the remarkable characteristics of early 2015, which is negative yields on European government bonds. There are several explanations cited for the negative yields, including central bank policy and fears of widespread deflation. Several potential beneficiaries of the negative yield are also explored, including U.S. Treasuries, global equities, gold, and the relative value of the U.S. dollar.

U.S. Auto Sales Roar off to Fast Start in January

Sales of new cars and trucks roared off to a fast start in January as General Motors said its January sales jumped 18.3 percent from a year earlier, Chrysler Group’s sales rose 14 percent and Nissan was up 15.1 percent, a January record. Industry observers said that January auto sales sustained the momentum from last year due to high consumer confidence and low gas prices.

The strong January auto sales are a positive data point on the strength of the U.S economy. In a recent survey, analysts said they expect light vehicle sales to rise about 200,000 to 16.7 million units in 2015, the sixth consecutive year of growth and the longest streak since WWII.

Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team. First Allied Asset Management provides investment management and advisory services to a number of programs sponsored by First Allied Securities and First Allied Advisory Services. First Allied Asset Management individuals who provide investment management services are not associated persons with any broker-dealer. 

International investing involves additional risk, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification.