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Market Commentary - Focus

Vital information about the markets, the economy, rates, and more.

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Basel III Proposed Regulatory Capital Changes Webinar

FinSer is pleased to provide a replay of a webinar we held jointly with the Accounting Firm of Fisher, Herbst & Kemble in September 2012 on the proposed changes to

Regulatory Capital, Implementation of Basel III, Minimum Regulatory Capital, Capital Adequacy and Transition provisions 
 
      AND

Regulatory Capital Rules: Standardized Approach for Risk-Weighted Assets; Market Discipline and Disclosure Requirements

To view the replay select this link.



Economic Outlook - JULY 2015

The US economy continues to improve, albeit in uneven fashion, as it pushes through the headwinds faced earlier this year that caused an outright contraction in GDP in the first quarter.  Fortunately, the second quarter shaped up much better, if not spectacular, with the first estimate at 2.3 percent for the period.  Despite the improvement, there is plenty of reason to be cautious in one’s optimism going forward. 

 

The strong dollar has taken a heavy toll on the US economy in the past few quarters and further pain may be forthcoming.  The export sector has suffered the currency impact most directly, but ripple effects have hurt domestic producers, grappling with a flood of cheap imports, and multinational corporations, taking a hit on externally generated profits.  Interest rate differentials are an important driver of a currency’s strength and anticipation of higher rates in the US is continuing to have the expected upward effect on the dollar.

 

In congressional testimony during July, Fed Chair Janet Yellen delivered a reassuring message about the outlook.  She said that some of the headwinds restraining economic growth, including the effects of dollar appreciation on net exports, should diminish over time.  As a result, the FOMC expects US GDP growth to strengthen over the remainder of the year and the unemployment rate to decline gradually.

 

  Yellen, and other Fed officials, reiterated the Fed remains watchful and data dependent.  While policymakers are encouraged, they are not unanimously boldly confident about US economic prospects.  Lack of certainty in the economic picture strongly suggests the Fed will remain cautious.  However, comments from Fed officials underscore the FOMC’s determination to move away from zero interest rate policy (ZIRP) and get the process of rate normalization started, even if it’s low and slow.  September remains the target date for the FOMC’s rate liftoff, but that remains somewhat of a close call because of ongoing soft business investment along with the recent pullback in consumer and small business confidence measures and the less than robust GDP figures.  While well anticipated by the markets, current yield levels suggest a rate hike is not fully priced in, as the markets appear to be challenging the Fed’s justification for such an increase in the next couple of months.  Apparently the only things that would derail the Fed’s plans would be a significant downgrading in the economic forecast or an international “event” that causes the dollar to re-surge, creating new headwinds and/or tightening financial conditions. So, for now, the smart money is on the Fed to begin tightening in September, but to continue to take it slow thereafter.