Market Commentary - Focus

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

View Today's Focus Report (PDF)
 View This Week's Focus Report (PDF)

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 

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

To view the replay select this link.

Economic Outlook - MAY 2015


The feeble growth rate of the U.S. economy in the first quarter was disappointing, with GDP being revised lower to  -0.7% from an initially reported +0.2 percent annualized rate. Markets are finding it disconcerting that incoming data is not pointing to a strong bounce back in the second quarter. The headwinds of a stronger dollar on exports and domestic product competitiveness coupled with continued decline in energy-related capital expenditures will temper growth forecasts for the first half of the year. This view is also shared by the FOMC, where according to recent meeting minutes, many members “thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied.” 

The labor market is the somewhat bright spot compared to the apparent weaknesses in other indicators. While employment growth slowed in March, it bounced back in April. Other job market data also point to ongoing strength. Weekly jobless claims continue to trend lower, hitting a 15-year low in May. People are not being fired, a sign of a tightening labor market and one that may be on the cusp of higher wages."


The key question facing the FOMC at the upcoming June 16-17 meeting is whether the weakness seen year-to-date was transitory or is a persistent, ongoing trend. According to the minutes of the April meeting, there was apparently an extensive debate on this topic. The familiar factors were cited on the transitory side (weather, West Coast ports, etc.), while fears about the stronger dollar and the drop in domestic energy production were several reasons suggested for some degree of persistence in negative data. At the end of the day, “most” felt that growth would return to a moderate pace and that markets would improve further. Nonetheless, the lingering uncertainty provides a reason for the Committee to wait for more incoming data.


 All in all, the Fed remains cautious and data-dependent. Officials are encouraged but not overly confident about U.S. economic prospects. Lack of certainty in the economic picture increases the likelihood that the Fed will remain on the sidelines. However, recent 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 is low and slow. Persistent labor market slack points to a slow pace of rate hikes. Although the labor market has been one of the few positives in the economic data in terms of job growth and a declining unemployment rate, labor market participation has not yet recovered, as many potential jobseekers remain sidelined and discouraged. Furthermore, although income growth has picked up, it will not likely match the robustness of prior economic cycles.

 Another reason to expect a gradual and shallow glide path in rates is the weak link between wages and prices. Over the past twenty years, the relationship between inflation and employment described by the Phillips curve loosened considerably. For a variety of reasons, including intense competition and technological innovations, companies have found it increasingly difficult to pass rising costs onto consumers, and have instead had to accept narrower profit margins. The loose transmission mechanism from wages to price inflation reduces the odds of an inflation scare. Thus, September remains the target date for the FOMC’s rate liftoff and is well anticipated by the markets. The only thing that could derail the Fed’s plan to tighten in September would be a significant downgrading in the economic forecast, and given the recent weak data, particularly in the area of durable goods orders, that remains an outside possibility