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Some are Interpreting the FOMC Minutes as Hawkish.

Some are interpreting the FOMC Minutes as hawkish.  The Minutes unexpectedly stated the Committee is closer to agreement on an exit strategy from aggressive stimulus, raising the possibility that it might increase rates sooner than anticipated.

As widely known, FRB Chair Yellen has committed monetary policy to stronger labor markets, which measures as vast array of indicators.  Yellen has stated as long as inflation remains in check and the labor utilizations remains “below normal levels” monetary policy will remain unchanged.

However the Minutes stated “the characterization of labor market underutilization might have to change before long, particularly if progress in the labor market continued to be faster than anticipated.”

Yellen speaks tomorrow in Jackson Hole and she has already telegraphed her planned topic…labor markets.

Equity markets initially sold off nominally when the Minutes were released only to then advance partially predicated by the word if.  Many market participants believe this is a really big if as it regards to labor utilization.

Yes 200,000 jobs were created for the last six months, the longest such period since 1997, however it must be noted it was only four months ago the economy finally created all the jobs lost from the recession even as the economy today is $2 trillion or 13.3% larger than the economic apex in December.

In other words, it took 58 months to recover all lost jobs in the recession according to the BLS.  Historically all lost jobs are recovered within 15 months after the recovery commenced.

Treasuries pared losses on the Minutes.

Today’s weekly reading of jobless claims might be of greater importance given the Minutes.  Also released today is the Philadelphia Fed, the LEI and existing home sales.

Last night the foreign markets were up.  London was up 0.23%, Paris up 0.64% and Frankfurt up 0.45%.  Japan was up 0.85% and Hang Seng down 0.66%.

The Dow should open nominally higher as the markets now await Yellen’s Jackson Hole speech, a speech that may offer some insight once QE ends.  The 10-year is off 2/32 to yield 2.44%.


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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.